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CHAPTER ONE: Introduction of internship
As part of the academic requirement for completing M. COM Master of Commerce. The
students are required to under go for two (2) months of internship with an organization.
The internship is to serve the purpose of acquainting the students with the practice of
knowledge of the discipline of banking administration.
This report is about National Bank of Pakistan. NBP was established in 1949 and since
then, it has expended its network, becoming the largest commercial Bank of the country.
It offers different products of services to its customers.
1.1. Background of the Study
In order to complete the requirement of M.COM I had to make internship in any
organization, I was interested in banking sector so this internship report is about NBP,
This bank was incorporated under companies’ act 1913 on 9th July, 1949 (just before
partition) at Calcutta. As well-developed banking setup plays very significant role in the
economic development of a country. Banking sector is precondition for the development
of any country. The banking sector helps in proper utilization of resources of the country
by financing the less developed sector. It also helps to keep cumulative demand in proper
balance with the supply of those resources, which are responsive to monetary demand.
1.2. Purpose of studies
The main purpose of the study in hand is together relevant information to compile
internship report on National Bank of Pakistan.
To observe, analyze and interpret the relevant data competently and in a useful manner.
To work practically in an organization.
To develop interpersonal communication.
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1.1. Scope of The study
As an internee in National Bank of Pakistan the main focus of my study research was on
general banking procedures in one of the branches of NBP. These operations include
remittances, deposits, advances and foreign exchange.
Similarly different aspects of overall of NBP are also covered in this report.
1.3. Objective of the Study
Discuss thorough study of National Bank of Pakistan.
To understand the various operations and to equip with practical knowledge of the
National bank of Pakistan.
The study done will benefit the finance students in particular and banking students in
general because the financial analysis section of this report comprehensively
encompasses all respects of financial analysis. Furthermore, Rahwali Branch,
Gujranwala may also benefit from the recommendations made at the end of the
report.
1.2. Limitation of The Study
Some thing is better than nothing. No matter how efficiently a study is conducted, it
cannot be perfect in all respects. This study was conducted in accordance with the
objectives of the study. The study may not include broad explanations of facts and figures
due to the nature of the study. Secondly, the limitation, which affects the study, is the
restriction on mentioning every fact of the bank due to the problem of secrecy of the
bank. In addition, the availability of required data was a problem as all the documents
and files are kept strictly under lock and key due to their strictly confidential nature.
Thirdly, the problem of short time period also makes the analysis restricted as one cannot
properly understand and thus analyze all the operations of a bank just a very short time of
eight weeks.
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1.4. Methodology
The report is based on my two months internship program in National Bank of Pakistan.
The methodology reported for collection of data is primary as well as secondary data.
The biggest source of information is my personal observation while working with staff
and having discussion with them. Formally arranged interviews and discussions also
helped me in this regards.
Primary data:
Primary data include, Personal observation and Interviews of The Staff Members
Secondary data:
Secondary data consist of Manuals, Journals, magazines, Annual Reports and
Internet.
1.5. Organization
I have chosen the banking sector to accomplish my internship and the
organization in which I have spent 8 weeks to complete my internship is National Bank
of Pakistan. It was established on 28th February 1978.As Rahwali is rural area so it was a
good step for the development of the area and it has played a vital role in the removing
regional disparity in the economy of Pakistan.
This branch has provide the advanced and new services to the people of local area as well
as people from different regions and also playing its role in international dealings by
enabling the people in foreign countries. This bank also trades in foreign currencies to
facilitate the people having foreign currencies and wants these in Pak rupees. This form
of transactions also helps to strengthen the economic conditions of the country.
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1.6. Summary
To summarize this chapter it can be said that to prepare internship report is
helpful for practical learning of knowledge which we gain in educational institutions. As
I have mentioned in this chapter that I have chosen NBP bank for the completion of my
internship because of my interest in the banking sector, and it has proven helpful for me
to understand how general banking is done. This internship also made me disciplined
person. I have learned there through observations, NBP manuals, and also by asking
questions from the staff of the bank.
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CHAPTER TWO: Organization
This chapter provides information about the Organization in which internship has been
done. It also states history of the organization. it elaborates the working of overall
respective sector in Pakistan. It also explains the role of the Organization in Pakistan.
What services are being offered by this organization and how much this organization is
contributing to the development of the country through its variety of products? What
facilities the organization is providing in increasing employment of the country.
Mission Statement
“To be recognized in the market place by Institutionalizing a merit & performance
culture, Creating a powerful & distinctive brand identity, Achieving top-tier financial
performance, and Adopting & living out our core values.”
Vision Statement
“To be the pre-eminent financial institution in Pakistan and achieve market recognition
both in the quality and delivery of service as well as the range of product offering”
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Page 6
BOARD OF DIRECTORS
Syed Ali Raza
(President)
Dr. Waqar Masood khan
(Director)
M.Arshad Chaudry
(Director)
Iftikhar Ali Malik
(Director)
Syed Shafaqat Ali Shah
(Director)
Skindar Hayat Jamali
(Director)
M.Zubair Motiwala
(Director)
Mohd Khalid Malik
(Secretary)
Source: Annual Report of NBP (2003)
MANAGEMENT
Management is a distinct process consisting of activities of planning, organizing,
actuating and controlling performed to determine and accomplish stated objectives with
the use of human being and other resources.The management has two types.
1. Centralized.
2. Decentralized.
Centralized Management tends to concentrate decision making at the top of the
Organization.
Decentralized disperses decision-making and authority throughout and further down the
organizational hierarchy.
NBP have a centralized type of management because the top management takes all the
decisions.
SENIOR MANAGEMENT OF NBP .
Senior Management of NBP consists of following member and their respective
designation.
Table
Masood Karim Sheikh SEVP & Group Chief, Corporate &
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Investment Banking Group and Chief Financial Officer
S. M. Rafique SEVP & Secretary Board of Directors
Derick CyprianSEVP & Group Chief, Special Assets & Remedial Management Group
Imam Bakhsh BalochSEVP & Group Chief, Compliance Group
Shahid Anwar KhanEVP & Group Chief, Commercial & Retail Banking Group
Nadeem A. DogarEVP & Group Chief, Information Technology Group
Muhammad Sardar KhawajaEVP & Group Chief, Audit & Inspection Group
Dr. Asif A. Brohi EVP & Group Chief, Operations Group
Javed MehmoodEVP & Group Chief, Risk Management Group
Muhammad Nusrat VohraEVP & Group Chief, Treasury Management Group
Amim Akhtar EVP & PSO to the President
Dr. Mirza Abrar BaigGroup Chief, Human Resources Management & Administration Group
Uzma Bashir Group Chief, Organization D&T Group
Net Work of Branches
NBP have wide range of branches inside the country and outside the country.
In Pakistan it has 29 regional offices, 1189 Branches and 4 Subsidiaries.
In overseas it has 16 overseas branches, 6 other branches.
Page 8
Products of NBP
Monthly Income Scheme
• Earn up to 11% p.a. +
• Minimum deposit of Rs. 20,000/- and a maximum deposit of Rs. 5,000,000/- for 5 years
• Free Demand Draft, Pay Order and Cheque Book*
• Convenience of NBP online Aasan Banking (for online banking customers)
• Free NBP Cash Card (ATM+Debit)
• Running finance facility up to 90%
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PLS Saving Account
• Earn up to 7.25% p.a. +
• Minimum saving balance of Rs. 20,001/- & a maximum balance of Rs. 300,000/-*
• Free NBP Cash Card (ATM + Debit)
• Convenience of NBP Online Aasan Banking (for online banking customers)
• Two debit withdrawals allowed in a month & no limit on number of deposit transactions
• Profit calculated on monthly and paid on half yearly basis
Mera Apna Karobar
• Minimum down payment, 10% of asset price (5% for PCO & Telecaster)
• Tenure 1 to 5 years (for PCO 2 years)
• Grace period 3 months
• Maximum loan amount Rs. 200,000/-
• Age 18-45 years
• Mark-up (variable) 1 year KIBOR + 2.00% p.a.
• The customer will pay markup @ 6% p.a., rest will be borne by GOP*
• Life & disability insurance paid by GOP*
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Home Financing
• Home Purchase
• Home Construction
• Home Renovation
• Purchase of Land + Construction
• Balance Transfer Facility (BTF)
NBP Saibaan
NBP Saibaan
(Open the Door to Your Dream Home)
Home Financing
Personal Loan
• Easy installments of 1 to 60 months at your choice
• No minimum income collateral & insurance charges required
• Quick processing and fastest disbursement
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• The product is for permanent employees of Government, Semi Government
and Autonomous bodies receiving salaries through NBP accounts
ATM + Debit Card
• Use it as an ATM in any of the ATM’s in Pakistan
• Use it as Debit Card in any of the outlets with ORIX POS machine
• Cash withdrawal up to Rs. 20,000/- per day
• Account Balance Enquiry
• Mini Statement (Only at NBP ATM)
• PIN Change facility (Only at NBP ATM)
Financing Facility for Stock Investors
• Comfortable environment for trading
• No security requirement, except for the customer’s equity
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• Customer’s equity freely available for investment
• Equity acceptable in cash or approved shares
Ready Cash Against Gold
Facility of Rs. 14, 000/-against each 10 gms of net weight of Gold Ornaments
No maximum limit of cash
Repayment after one year
Roll over facility
No penalty for each repayment
Agriculture Farming Program
• Competitive mark-up rate
• Quick & easy processing
• Delivery at the farmer’s doorstep
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• Technical guidance to farmers
• Wide range of financing schemes for farmers
• Finance facility up to Rs. 500,000/- for landless farmers against
personal guarantee
• Financing available against pass book, residential/commercial
property, gold ornaments and paper security
• Loan facility on revolving basis for three years (renewable on yearly basis
without documentation and approval)
NBP Kisan Dost
NBP Kisan Dost
( Agriculture Made Easy)
Pakremit is an internet based Home Remittance Service. This service is available to
U.S. residents for sending money to their family and friends in Pakistan. One must have a
valid US Dollar account with a U.S. bank or a US Dollar credit or debit card in order to
remit funds through this channel.
Remitters in USA can log on to our user friendly website, www.pakremit.com and easily
remit funds to Pakistan from the comfort of their homes, in a matter of minutes.
The service is fully secure with advance encryption application and is available for use 24
hours a day, 7 days a week. Fees and exchange rate have been set at competitive levels
and the remitters have the ability to track delivery of funds as well.
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Personal Accident Insurance
• No documentation
• No medical required
• Premium Auto Debit facility & choice of deactivation
• Coverage includes death due to:
• Natural Calamities e.g. Earthquake, Flood, Cyclone etc.
• Accident
• Riots*
• Civil Commotion*
• Strikes*
• Acts of Terrorism*
NBP Protection Shield
NBP Protection Shield
(Life is Precious)
2.1. Overall Respective Sector in Pakistan
A financial system is a structure that channels funds from savers/investors to those who
require funds for building infrastructure, starting and running businesses, building or
improving houses, consumer financing of big-ticket items like automobiles, etc. Financial
systems are crucial for the allocation of resources in a modern economy. Currently,
Pakistanis save about 15% of the GDP to provide a pool for domestic investments from
private savings, which amount to nearly $ 25 billion a year. In addition, Pakistani
Page 15
expatriates remit nearly $ 8 billion a year that flow into Pakistan's economy through the
banking sector.
There are different opinions that how the word ‘Bank’ originated. Some of the author’s
opinion that this word is derived from the word ‘Bancus’ or Banque’, which means a
bench. The explanation of this origin is attributed to the fact that the Jews in Lombard
transacted the business of money exchange on benches in the market place; and when the
business failed, the people destroyed the ‘bench’. Incidentally the word ‘Bankrupt’s said
to have evolved from this practice.
Some of the authors are of opinion that the word ‘Bank’ is derived from the German
word back, which means ‘joint stock fund’. Later on when the German occupied major
part of the Italy the word ‘Back’ was italicized into ‘Back’.
In fact human left the need of bank when it begins to realize the importance of money as
a medium of exchange. Perhaps it where the Babylonian who developed banking system
as early as 2000 B.C. At that time temples were used as banks because of their prevalent
respect. During the rule of king Hamurabi (1788 – 1686 BC) the founder of Babylonians
Empire, loans were started being granted for interest. The borrower has to provide
guarantee or he had to pledge his goods or valuables. King Hamurabi drew up a code
wherein he laid down standards rules for procedures for banking operations by temples
and great landowners. Also in Greece, the temples were used as banks, where the people
deposited their money and other valuables for safe custody and security. In Europe with
the ‘revival of civilization’ (Renaissance) in the middle of twelve century, trade and
commerce started expanding and this development compelled the business community to
borrow the money from the Hebrew moneylenders on high rates of interest and usury.
Seeing the great demand, these moneylenders started organizing themselves and bank
started up at the principle seaports of southern Europe. Soon Venice and Geneva became
the most important money markets of the time and banking though different from its
present form, flourished. What we know as ‘modern banking’ originated in the 14th
century in Barcelona.
Page 16
Definitions of Bank
"A financial institution, which deals with money and credit. It accepts
Deposits from individuals, firms and companies at a lower rate of
Interest and gives at higher rate of interest to those who need them.”
A financial establishment which uses money deposited by customers for investment, pays
it out when required, makes loan at interest, exchanges currency, etc.
J.W Gilbert in his principles and practice banking defines a banker in these words:
“A banker is dealer in capital or more properly, a dealer in money. He is intermediate
party between the borrower and the lender. He borrows of one and lends to another”.
Sir John Paged defines banker in these terms:
“That no person or body, corporate or otherwise, can be a banker who does not
Take deposits accounts.
Take current accounts,
Issue and pay Cheques and
Collect Cheques crossed and uncrossed for his customers” The American
defined the term banker in a very broad sense as under:
“By banking, we mean the business of dealing in credits and by a ‘Bank’ we
include every person, firm or company having a place of business where credits are
opened by deposits of collection of money or currency. Subjects to be paid or remitted on
Cheques or order, money is advanced or loaned on stocks, bonds, bullion, bill of
exchange, promissory notes are received for discount or sale”.
Evolution of Banking in Pakistan
Page 17
The first phase in evolution of banking in Pakistan sees very hard days for the whole
banking sector. Starting virtually from scratch in 1947, the country today possesses a full
range of banking and financial institutions to cope with various needs of the economy.
The area now constituting Pakistan was, relatively speaking, fairly well provided with
banking facilities in undivided India, in March 1947 there were 3496 offices of Indian
scheduled banks out of which as many as 487 were situated in territories now constituting
Pakistan.
The Reserve bank of India was the central banking authority in India. At the time of
partition it was decided that in the interest of smooth transition it should continue to
function in newly emerging state of Pakistan, until 30th Sep.1948.
In 1947 due to uncertainty and unsuitability the banking sector suffer heavy losses.
This resulted in a negative effect on baking service in Pakistan. The banks, which had
their registered offices in Pakistan, transferred them to India. In an effort to bring about
the collapse of the new state by pushing a deliberate policy of withdrawals the Indian
bank offices closed quickly. Those banks, which stayed, operated only in name pending
the winding up of their business. The number of scheduled banks thus declined form 487
branches before independence to only 195 branches by 30th June1948.
Banking Growth during (1948-1970)
In this tense situation, a committee was immediately setup to formulate a scheme of
central banking legislation for Pakistan. Many specialists were of the opinion that in view
of the acute shortage of trained staff, any idea of establishing a central bank was I
impractical and the best that could be attempted was the setting up of a currency board
until such times as sufficient staff could be organize to operate a central bank.
The questions as to whether the institution should be only a currency board or a full-
fledged central bank had exercised the mind of the Pakistan government since
independence. Through, it was realized that the shortage of trained personal to run the
Page 18
central bank would present serious difficulty in view of the tangible advantages that a
central bank enjoyed over currency board, the government ultimately decided to take the
bold step of setting up a full fledged central banking authority. Among other factors,
which led to this decision, there was the fact the banking facilities in the country had
been totally disrupted and there was an urgent need for their rehabilitation, which a
central bank alone could meet. As there was hardly any time to pass as Act, an order was
drafted, known as the state bank of Pakistan order, which was promulgated by the
government of Pakistan on 12th may 1948. The state bank declared open on July 1, 1948
by the father of the nation.
One of the first tasks of the state bank was to arrange for the replacement of the Reserve
bank of India notes, which had continued to circulate in Pakistan during the transitional
period, by Pakistan currency.
The first Pakistan notes were issued in October 1948 in the denominations of Rs. 5, 10 &
100.
An equally urgent task, which the new central bank had to address itself, was the creation
of a national banking system. To this end, while extending every help and encouragement
to Habib Bank to expand its organization, the state bank recommended the setting up of a
new banking institution to serve both as an agent to the state bank recommended the
setting up of a new banking institution to serve both as an agent of the state bank as well
as the spearhead of its credit polices.
Accordingly the NATIONAL BANK OF PAKITSN was setup under an ordinance in
November 1949. It started with six offices in the former East Pakistan. In view of the
special role assigned to the new institution, contrary to traditional practices the Governor
of the state bank was appointed to head its Board of Director in 1950. Under the fostering
care of the state bank and the support of the government, the new institution developed
rapidly. By using its special powers, the state bank made liberal advances to the new
bank to help it expand credit facilities in the country. By 1952, the National bank of India
Page 19
shortly, afterwards, in November 1952, the governor of the state bank ceased to function
as the president of National bank of Pakistan.
With a view to broadening the institutional framework of the financial system, the state
bank also sponsored the establishment of specialized credit institutions in the filed of
agriculture and industry. Banking companies (control) act was passed in December 1948
specifically empowering the state bank to control the operations of banking companies in
Pakistan.
Moreover realizing that the most serious limitation on the expansion of banking services
in Pakistan was the lack of trained personal, the state bank sponsored a banking training
scheme, which was repeated after year and turned out a large number of bankers.
As the Commercial Banking facilities continued to expand, a new Pakistani bank, the
National Commercial Bank was established and registered as a scheduled bank. In the
filed of industrial finance a new institution known as the industrial credit and investment
cooperation was set up.
The year 1958 marked the completion of the first decade of the working of the State Bank
of Pakistan. When it was established there were only 195 bank offices in existence. At
the end of June 1958 their number had increased to 307, of which Pakistani banks
accounted for 232 against 25 in mid 1948. Moreover at the end of June 1958, Pakistani
banks held 60% of the total banks deposits, and were responsible for 65 of total bank
credit.
When the Ayub Khan Government took over in 1958, the banking and monetary scene
was significantly affected by developments such as the liberalization of imports, transfer
of business in food grains to the private sector, and the firming up of commodity markets.
The demand of funds picked up and there was a substantial expansion of bank credit to
the private sector. The pace of expansion in the institutional frameworks of the country’s
banking system quickened and a new Pakistani, bank, namely the United Bank Limited
was established.
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Owning the five years 1960-65, the credit structure in Pakistan made rapid progress. The
bank extended its network by opening six new offices located at Chitagong, Peshawar,
Quetta, Khulna, Layallpur and Rawalpindi. The number of scheduled bank offices rose
from 430 at the end of June 1960 to 1591 in June 1965. Several new banks were added to
the list of scheduled banks.
Two principal additions were the commerce bank, and the standard bank. The number of
scheduled banks, which stood at 29 in June 1960 rose to 36 by June 1965.
Under the impact of economic growth and dear scope of private enterprises, bank credit
to the private sector rose from Rs. 1,458 millions to Rs. 5759 million. Thus the total
expansion in bank credit to the private sector during this period amounted to Rs. 4300
million, which gave a annual expansion of Rs. 860 million compared to the annual
average increase of Rs. 144 million over the preceding five years. Banks deposits
increased from Rs. 2,493 million to Rs. 6883 million during the five years period ended
June 1965 compared to Rs. 231 million in the proceeding five years.
Time deposits during this period increased from Rs. 946 million to Rs. 3228 million,
where demand deposits rose from Rs. 1997 million to Rs 3655 million. The increase in
time deposits was particularly rapid. The ratio of time deposits to total deposits in June
1965 stood at 49.6 percentage as against 32.01 percentage five years earlier. Another
salient feature of banking development during this period was that since the rate of
increase in bank deposits lagged behind the rate of expansion in bank credit, the banked
has to depend increasingly on central bank finance. They borrowing from the state bank
rose from Rs. 11 million in June 1960 to Rs. 1688 million in June 1965. Owing keen
demand for bank credit, bank’s investments could not increase as rapidly as their
advances. Their investments totaled to Rs. 1,874 million at the end of June 1965
compared to Rs. 1,231 million in June 1960. Investments, which were almost equal to
their advances in June 1960, were only about one third of the advances in June 1965.The
third plane period witnessed a further expansion of banking facilities in the country the
total number of scheduled banked offices increased from 1,591 at the end of June 1965 to
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3133 at the close of June 1970. During the same bank credit to the private sector rose
from Rs. 5,789 million to Rs. 9492 million. There was also a substantial growth in the
bank deposits, which increased from Rs. 6883 million June 1965 to Rs. 13147 million at
the end of June 1970. A remarkable change occurred during this period related to the
composition of deposits. Time deposit becomes greater than demand deposits forming
about 54 percent age of the total deposits. As oppose to what happened in the previous
period, banks were able to finance a mush higher level of credit expansion without
having to increase their borrowings from the central bank.
Banking Reforms 1972
After the assumption of office by a new government in 1971, may 1972 different reforms
were introduced to make the banks more responsive to the requirements of economics
growth with social justice. The reforms aimed at bringing about a more purposeful and
equitable distribution of bank credit, improving the soundness and efficiency of the
banks, and securing greater social accountability of the banking system as a whole.
The role of the banking system had been truly spectacular in mobilizing savings of the
community and meeting the credit needs of the economy. But at the same time, the banks
had generally neglected their role in promoting social justice and had failed to play an
effective role in ensuring a wider and more equitable dispersal of the benefits of
economic growth. In particular the inter locking of ownership with commercial and
industrial interests had led to the misuse of bank resources. There was a heavy
concentration of credit in big accounts and in urban area. Credit facilities for agriculture,
small business, newly emerging exports and housing had remained obviously inadequate
while the banks indulged in capital financing in few selected business sectors and issued
guarantees on behalf of favored clients, term clients, term financing facilities for industry
were wholly absent.
Under the banking reforms introduced in May 1972 the state bank of Pakistan was
accorded wider powers. It was authorized to remove directors or managerial personnel, if
necessary and supersede the board of directors of a banking company and appoint
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administrators during the period of such super session. It was also empowered to
nominate directors on the board of every bank. As regard bank directors, it was provided
that anyone defaulting in meeting his obligations to bank would forfeit his directorship.
Moreover, it was laid down that no person could serve as director of a bank for more than
six years continuously. Each bank was required to have a paid up capital of not less than
5 percent age of its deposits to be progressively build up to 10 percent age over a period
of time. The banks were also required to transfer 10 percentage of their profit their
reserves every years after the reserve became equal to the paid up capital. With a view to
diversity the ownership of the banks, the banks were required to raise new capital from
the market. Unsecured loans to directors, their families or firms and companies, were
totally prohibited.
The bank reforms also brought about the establishment of new institutions to achieve new objectives.A national credit consultative was setup under the supervision of the state bank with representation form the government and the private sector. It was assigned the task of determining of economy’s annual credit needs within the safe limits of monetary and credit expansion with reference to the annual development plan. Such a credit plan was to cover the public and private sectors. Alongside the National credit council and Agricultural Advisory Committee was formed to allocate agriculture credit for various purposes, to coordinate the operation or the agriculture credit agencies and to oversee the flow of credit to the designated targets. A standing committee on exports in general and the new emerging exports in particular, was also established. With a view to encourage the banks to extend credit to small borrowers, a credit guarantee scheme was introduced under which the state bank under took to share any bonfire losses incurred by the commercial banks in case of small loans of advances to agriculture.
At the same time two financing institutions were established. The people’s Finance
Corporation was designed to provide finance to people of small means while the National
Development Finance Corporation was set up of finance public sector owned and
managed industries and enterprises.
Nationalization of Banks (1974) In Pakistan
Page 23
The banking reforms turned to be transitional and interim step and when they were hardly
eighteen months old the government nationalized the banking systems, with the following
main objectives.
To enable the government to use the capital concentrated in the hands of a few rich
bankers for the rapid economic development of the country and the more urgent social
welfare objectives.
To distribute equitably credit too different classes sectors and regions.
To coordinate the banking policies in various area of feasible joint activity without
eliminating healthy competition among banks.
The act passed for the nationalization of banks is known as the banks Nationalization Act
1974.
Thus under this act the state bank of Pakistan and all the commercial banks incorporated
in Pakistan and carrying business in or outside the country were brought under
government ownership with effect from Jan 1, 1974. The ownership, management and
control of all Pakistani banks stood transferred to and vested in the Federal government.
The shareholders were provided compensation in the form of federal government bonds
redeemable at par anytime within the period of fifteen years. Under the Nationalization
act, the Chairman, Directors and Executives of various banks, other than those appointed
by federal government were removed from their offices and the central boards of the
banks and all local bodies were dissolved. Pakistan banking council was established to
coordinate the activities of the Nationalized Commercial banks. At the time of
Nationalization on December31, 1973 there were following 14 Pakistani commercial
banks with 3323 offices allover Pakistan and 74 offices in foreign countries:
National banks of Pakistan
Habib bank limited
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Habib bank (overseas) limited
United bank limited
Muslim commercial bank limited
Commerce bank limited
Standard bank limited
Australia bank limited
Bank of Bahawalpur limited
Premium bank limited
Pak Bank limited
Sarhad bank limited
Lahore commercial limited
Punjab provincial co-operative bank limited
The Pakistan banking council prepared a scheme for the recognition of banks. The bank
(amalgamation) scheme 1974 was notified in April, providing for the amalgamation of
the smaller banks with bigger ones and following the five units in there phases:
National bank limited
Habib bank limited
United bank limite
Muslim commercial bank limited
Allied bank of Pakistan limited
Page 25
The first phase was completed on 30th June. 1974. When the bank Bahawalpur was
merged with the National Bank of Pakistan. The premier Bank Limited with Muslim
Commercial Bank limited and Sarhad Bank Limited and Pak bank limited and renamed
as Allied Bank of Pakistan limited.
The second phase was completed on 31st Dec.1974, when the commerce bank limited
merged with the United Bank limited.
The third and the final phase were completed on 30th June 1975 when the standard bank
limited was merged with Habib Bank limited.
The nationalization was very smooth and gave very positive results.
The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661 by end
June 1992. The bank deposits, which stood at Rs. 1925 corers at the end 1973 reached the
highest, mark about 323 corers.
2.2. Role of NBP Bank LTD in Pakistan
Islamization of Banking
Another major development in the history of Pakistan Banking System was the
introduced of interest free banking in selected Commercial Banks with effect form Jan1,
1981. This followed the effort to eliminated interest from the operation of Nation
investment trust, the House Building Finance Corporation of Pakistan. Certain
amendments were made in banking and other laws with the object of ushering in a new
system of banking, which would confirm of Sharia. A new law Modaraba Companies
Ordinance 1980 was promulgated. Separate interest free counters began to operate in all
the nationalized commercial banks free counters began to operate in all the nationalized
commercial banks. The state bank provides finance against participation term certificate
and also against promissory notes supported by Modaraba certificate.
Page 26
In order to cover interest free transactions certain banking definitions such as creditors,
debtor, and advances credits and deposits were revised. Stipulations concerning form of
business in which banking companies may engage may also have been modified schemes
were introduced to provide interest free loans to formers and deserving students.
A private Limited Company named as Bankers Equity limited was incorporated in 1979
to provide financial assistance to the industrial sector primarily on interest free basis.
A scheme to extend interest free productive loans to farmers and fisherman has also been
introduced. Instead of interest, a system based on mark-up in price, exchange rate
differential, and profit and loss sharing accounts were introduced.
Different financial schemes introduced in the Islamization process are:
Musharika Financing.
Hire Purchase Financing.
Modaraba Financing.
Specific Purpose Modaraba.
Dis-investments and Deregulation of Banking – 1991
When it was realized that the role of public sector in the economy is over extended and
the banking sector has more earning potential in the private sector the process of
privatization banking sector restarted in 1991 by the Muslim League Government.
Muslim Commercial Bank was Dis-invested in to two phases while ABL was sold to its
employees. Since then allot of investment is being made in the banking sector and several
new banks were established and still the process is going on. Now only NBP is
government bank other than SBP. The performance of this bank will be analyzed and
judged in the following chapters.
Interest Free Banking
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A new concept of interest free banking was introduced in 1981 and by now it has been
established on sound footing and new trends and techniques are being implemented to
make this system result oriented. New products and their systematic consumption are
making Pakistani banking comparable to their several modern counterparts anywhere in
the developed world.
OUR VALUES
INTEGRITY
We are the trustees of public funds and serve our community with integrity. We believe in
being the best at always doing the right thing. We deliver on our responsibilities and
commitments to our customers as well as our colleagues.
RESPECT
We respect our customer’s values, beliefs, culture and history. We value the equality of
gender and diversity of experience and education that our employees bring with them. We
create an environment where each individual is enabled to succeed.
EXCELLENCE
We take personal responsibility for our role as leaders in the pursuit of excellence. We are a
performance driven, result oriented organization where merit is the only criterion for reward.
CUSTOMER CENTRICITY
Our customers are at the heart of everything we do. We thrive on the challenge of
understanding their needs and aspirations, both realized and unrealized. We make every
effort to exceed customer expectations through superior services and solutions.
INNOVATION
We encourage and reward people who challenge the status quo and think beyond the
boundaries of the conventional. Our teams work together for the smooth and efficient
implementation of ideas and initiatives
Objectives of NBP
National bank of Pakistan is also a commercial organization and its main objective is
profit maximization. This is achieved in two ways:
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1. By increasing deposits.
2. By charging interest on loans provided to the private sector and business
community.
These are explained as:
Increase in deposits:
Competition in banking is intense and every bank whether it is Pakistani, foreign, private
or nationalized tries to increase its deposits by providing better facilities to its customers.
By increasing its deposits a bank can extend greater amount of loan and hence achieves
higher profit. NBP is also improving its facilities and services to attract customers with
higher volume of deposits. There are two main factors involved in increasing the
deposits. These factors are improving the services and courtesy. NBP is continuously
working on these two factors to increase its deposits.
Extension of loans:
The profitability of a bank largely depends on the amount given to people as loan and the
type of people to whom credit is given i.e. the credit worthiness of the borrowers. This
strategy has worked quite well for NBP. Deposits are collected from the people and
invested in different projects. NBP prefers to give loans to financially sound and reliable
parties, after securing the collators. NBP has an extremely well organized section. The
staff is adequately trained, and educated and competent. They carry out extensive
financial analysis before deciding on the loan. Interest charged on the loans potentially
contributes to higher profits.
Some of the other objectives of NBP are:
i. Improve customer services.
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ii. Quick disposal of credit cases.
iii. Efficient operation of the branches.
iv. Better Public Relations.
v. Operational and advisory services for foreign exchange accounts activities
Unmatched Banking Facilities
Deposit security, Guaranteed by Government of Pakistan.
Highest rates of return to attract the savings.
Lowest rates on exports and other borrowings.
Largest contribution towards Government and Semi-Government requirements.
Agents of the SBP handling Treasury Functions, receipts of Taxes & other Revenues.
Handling of salaries & pensions of federal/provincial/defense personnel.
Utility Bills collections.
Hajj arrangements.
Sale and encashment of prize Bonds.
Sale and encashment of Defense Savings and Special Savings Certificates.
Safe Deposit Lockers for customers.
Rational Human Resource Management.
The prestigious periodical “The Banker” UK recognized NBP as the best bank for 2001-
2002 and NBP is the bank of the year for 2004-2004 of Pakistan.
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i. AAA rating awarded JCR-VIS Credit co. Ltd and affiliated of Japan Credit Rating
Agency for 2001.
ii. AAA+1 rating awarded JCR-VIS Credit Co.Ltd and affiliated of Japan Credit
Rating Agency for 2002
NBP at the forefront of Pak-Afghan trade
i. Booth at dry port Peshawar
ii. Booth at Pak Afghan border (Torkham) NWFP
iii. Booth at Pak Afghan border (Chamman). Baluchistan.
iv. Establishing branch at Kabul.
2.3. Role of NBP IN Terms OF Number of Branches
16 Overseas Branches
4 Representative Offices
1 Subsidiary
1 Joint Venture
29 Regional Offices
1,189 Branches
130 Online Branches
4 Subsidiaries
Overseas Branches
2.6.1. America and Europe Region
USA
Canada
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Germany
France
Far East Region
Hong Kong
Japan
South Korea
China
Middle East, Africa & South Asia Region
Bahrain
Egypt
Bangladesh
EPZ
Central Asian Republics
Afghanistan
Turkmenistan
Kyrgyz Republic
Kazakhstan
Uzbekistan
Azerbaijan
Domestic Branches
Sind
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Dadu/ Sanghar
Hyderabad
Jacobabad/ Shikarpur
Karachi
Larkana
Mirpurkhas/ Badin
Nawabshah/ N' Feroze
Sukkur/ Khairpur
Tharparkar
. Punjab
Bahawalpur
D.G. Khan/ RYKhan
Faisalabad
Gujranwala
Sialkot/ Narowal
Islamabad
Jhang
Jhelum/ Gujrat/ Chakwal
Lahore
Multan/ Baha'nagar
Murree/ Attock/ Gilgit
Rawalpindi
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Sahiwal
Sargodha/ Sheikhupura
NWFP
Abbottabad/ Mansehra
Bannu/ D.I. Khan
Kohat / Mingora
Mardan
Peshawar
.Baluchistan
All Branches
Azad Kashmir
Muzaffarabad
Mirpur
This shows that how much wide range of country is using NBP’s facilities.NBP has a large
branch network in Pakistan.
2.4. Organization Office in which I have done internship:
I did my internship in NBP Rahwali Branch. It was established on 28 th February 1978.It
has played an important role in the development of rahwali as well as the surrounding
areas of rahwali.
Some important information about my branch is as follows:
Management of the branch
Branch ManagerMr. Zeeshan
Operational Manager Mr. Muhammad Qasim
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KPO(key punch
operator)Assistant
Mr. Bilal Ahmad
Cash Officer(cash operations) Miss. Shumaila Rana
Cash officer(cash operation) Mr. Muhammad Nazim
CSO(customer service officer)Miss. Arifa Haroon
Other General Information of the Branch
Deposits
The total deposits of NBP Rahwali branch are about to 602 million. In deposit there is
increasing trend.NBP rahwali branch has largest deposits than any other bank in Pakistan.
Number and types of accounts
PLS Account 2258
Current account 335
Foreign Currency Account 635
Khushkhali Bachat Account 855
Total number of accounts 4083
DEPARTMENTS OF NBP Rahwali Branch
Cash Department:
General Banking
Remittances Department:
Advances department:
Clearing Department:
Computer Department:
Establishment Department:
Summary
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By summarizing this chapter it can be said that banking sector in Pakistan is playing an
important role in the development of the country. It has made the life of people so
convenient that was much difficult before some years; it has become easy to transfer
money not only within the country but also at international level. Now as a part of
banking sector NBP bank is playing a vital role in the development of Pakistan by
offering products, NBP Trainee program, and also with the help of NBP career.
CHAPTER THREE: ORGANIZATION
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This chapter is an imperative part of the internship report as it contains detailed
information about the branch in which internship has been completed. This also tells
about the history of the branch, its different departments, its role in that area as well its
surroundings, about the working of the branch, its relationship with the HEAD OFFICE,
its number of departments, its staff and their qualifications. It also contains information
about promotion system of the organization. Critical analysis of the branch and its
working is also done in this chapter. This chapter completely revolves around the
organization in which internship has been done. Different functions within the branch and
duties and responsibilities of the staff have discussed in this chapter. This chapter also
provides details about the morale of the staff and how much the branch is contributing in
the satisfaction of customers.
3.1. Brief History of the Organization
The NBP was established vide NBP Ordinance No. XIX of November 9. 1949.
British Govt. devalued its currency in September 1949, India devalued its rupees but
Pakistan did not. It led to a crisis in trading between the two countries and India refused
to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established
through an Ordinance of GOP. National Bank of Pakistan maintains its position as
Pakistan's premier bank determined to set higher standards of achievements. It is the
major business partner for the Government of Pakistan with special emphasis on fostering
Pakistan's economic growth through aggressive and balanced lending policies,
technologically oriented products and services offered through its large network of
branches locally, internationally and representative offices.
The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4, 1947 by
the former Bahawalpur State.
NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests
at 57 of its offices where the turnover of the business under the head amounted to
Rs.2460 million.
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i) Deposits held by NBP constituted about 3.1% of total deposits of all Pakistani
Banks in 1949, which rose to 38% in 1952.
ii) Growth in Deposits was accompanied by increase in Bank portfolio in advances.
NBP lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of
agriculture and commerce.
iii) NBP advances reached Rs.554.4 million by December 1959, which was one third of
the total schedule bank credit.
iv) 3.1.2. Relationship of Head office to the branch offices
This is based on how policies are communicated to regional offices and branches
at the right time. At NBP I have observed the communication methods such as
mail, telephonic and fax. Circulars related to Cash and RTC’s are sent by HO
(head office) twice in a week. Communication is made through CIRCULARS
when amendment is made in policies of the Bank or in the operations.
3.1.3. Number of Departments
Cash Department:
General Banking
Remittances Department:
Advances department:
Clearing Department:
Computer Department:
Establishment Department:
DEPARTMENTATION OF NBP
CASH DEPARTMENT
Cash department performs the following functions:
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Receipt
The money, which either comes or goes out from the bank, its record should be kept. Cash department performs this function. The deposits of all customers of the bank are controlled by means of ledger accounts. Every customer has its own ledger account and has separate ledger cards.
Payments
It is a banker’s primary contract to repay money received for this customer’s account
usually by honoring his cheques.
Cheques and their Payment
The Negotiable Instruments. Act, 1881 3
“Cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand”.
Since a Cheque has been declared to be a bill of exchange, it must have all its
characteristics as mentioned in Section 5 of the Negotiable Instruments Act, 1881.
Therefore, one can say that a Cheque can be defined as an:
“An unconditional order in writing drawn on a specified banker, signed by the drawer,
requiring the banker to pay on demand a sum certain in money to, or to the order of, a
specified person or to the bearer, and which does not order any act to be done in addition
to the payment of money”.
The Requisites of Cheque
There is no prescribed form of words or design of a Cheque, but in order to fulfill the
requirements mentioned in Section 6 above the Cheque must have the following.
a) It should be in writing
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b) The unconditional order
c) Drawn on specific banker only
d) Payment on Demand
e) Sum Certain in money
f) Payable to a specific person
g) Signed by the drawer
Parties to Cheque
The normal Cheque is one in which there is a drawer, a drawee banker and a payee, or no
payee but bearer.
a) The Drawer
b) The Drawee
c) The Payee
Types of Cheques
Bankers in Pakistan deal with three types of cheques
a) Bearer Cheques
Bearer cheques are cashable at the counter of the bank. These can also be collected
through clearing.
b) Order cheque
These types of cheques are also cashable on the counter but its holder must satisfy the
banker that he is the proper man to collect the payment of the cheque and he has to show
his identification. It can also be collected through clearing.
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c) Crossed Cheque
These cheques are not payable in cash at the counters of a banker. It can only be credited
to the payee’s account. If there are two persons having accounts at the same bank, one of
the account holder issues a cross-cheque in favour of the other account holder. Then the
cheque will be credited to the account of the person to whom the cheque was issued and
debited from the account of the person who has actually issued the cheque.
Payment of Cheques
It is a banker’s primary contract to repay money received for his customer’s account
usually by honouring his cheques. Payment of money deposited by the customer is one of
the root functions of banking. The acid test of banking is the receipt of money etc. from
the depositors, and repayment to them. This paying function is one, which is the
distinguishing mark of a banker and differentiates him from other institutions, which
receive money from the public. However the bankers’ legal protection is only when
payment is in ‘Due Course’. The payment in due course means payment in accordance
with the apparent tenor of the instrument, in good faith and without negligence to any
person in possession thereof under circumstances, which do not afford a reasonable
ground of believing that he is not entitled to receive payment of the amount therein
mentioned. It is a contractual obligation of a banker to honor his customer’s cheques if
the following essentials are fulfilled.
a) Cheques should be in a proper form:
b) Cheque should not be crossed:
c) Cheque should be drawn on the particular bank:
d) Cheque should not mutilated:
e) Funds must be sufficient and available:
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f) The Cheque should not be post dated or stale:
g) Cheque should be presented during banking hours:
CLEARANCE DEPARTMENT
A clearinghouse is an association of commercial banks set up in given locality for the
purpose of interchange and settlement of credit claims. The function of clearinghouse is
performed by the central bank of a country by tradition or by law. In Pakistan, the
clearing system is operated by the SBP. If SBP has no office at a place, then NBP, as a
representative of SBP act as a clearinghouse.
After the World War II, a rapid growth in banking institutions has taken place. The use of
cheques in making payments has also widely increased. The collection as settlement of
mutual obligations in the form of cheques is now a big task for all the commercial bank.
When Cheque is drawn on one bank and the holder (payee) deposits the same in his
account at the bank of the drawer, the mutual obligation are settled by the internal bank
administration and there arises no inter bank debits from the use of cheques. The total
assets and total liabilities of the bank remain unchanged.
In practice, the person receiving a Cheque as rarely a depositor of the cheque at the same
bank as the drawer. He deposits the cheque with his bank other than of payer for the
collection of the amount. Now the bank in which the cheque has been deposited becomes
a creditor of the drawer’s bank. The depositor bank will pay his amount of the cheque by
transferring it from cash reserves if there are no offsetting transactions. The banks on
which the cheques are drawn become in debt to the bank in which the cheques are
deposited. At the same time, the creditors’ banks receive large amounts of cheques drawn
on other banks giving claims of payment by them.
The easy, safe and most efficient way is to offset the reciprocal claims against the other
and receive only the net amount owned by them. This facility of net inter bank payment
is provided by the clearinghouse.
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The representatives of the local commercial banks meet at a fixed time on all the business
days of the week. The meeting is held in the office of the bank that officially performs the
duties of clearinghouse. The representatives of the commercial banks deliver the cheques
payable at other local banks and receive the cheques drawn on their bank. The cheques
are then sorted according to the bank on which they are drawn. A summary sheet is
prepared which shows the names of the banks, the total number of cheques delivered and
received by them. Totals are also made of all the cheques presented by or to each bank.
The difference between the total represents the amount to be paid by a particular bank
and the amount to be received by it. Each bank then receives the net amount due to it or
pays the net amount owed by it.
In-Word Clearing Books
The bank uses this book for the purpose of recording all the cheques that are being
received by the bank in the first clearing. All details of the cheques are recorded in this
book.
Out-Word Clearing Book:
The bank uses outward clearing register for the purpose of recording all the details of the
cheques that the bank has delivered to other banks.
ADVANCES DEPARTMENT
Advances department is one of the most sensitive and important departments of the bank.
The major portion of the profit is earned through this department. The job of this
department is to make proposals about the loans. The Credit Management Division of
Head Office directly controls all the advances. As we known bank is a profit seeking
institution. It attracts surplus balances from the customers at low rate of interest and
makes advances at a higher rate of interest to the individuals and business firms. Credit
extensions are the most important activity of all financial institutions, because it is the
main source of earning. However, at the same time, it is a very risky task and the risk
cannot be completely eliminated but could be minimized largely with certain techniques.
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Any individual or company, who wants loan from NBP, first of all has to undergo the
filling of a prescribed form, which provides the following information to the banker.
3.18.1) Name and address of the borrower.
a) Existing financial position of a borrower at a particular branch.
b) Accounts details of other banks (if any).
c) Security against loan.
d) Exiting financial position of the company. (Balance Sheet & Income Statement).
e) Signing a promissory note is also a requirement of lending, through this note
borrower promise that he will be responsible to pay the certain amount of money
with interest.
Principles of Advances
There are five principles, which must be duly observed while advancing money to the
borrowers.
a. Safety
b. Liquidity
c. Dispersal
d. Remuneration
e. Suitability
a. Safety
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Banker’s funds comprise mainly of money borrowed from numerous customers on
various accounts such as Current Account, Savings Bank Account, Call Deposit
Account, Special Notice Account and Fixed Deposit Account. It indicates that
whatever money the banker holds is that of his customers who have entrusted the
banker with it only because they have full confidence in the expert handling of money
by their banker. Therefore, the banker must be very careful and ensure that his
depositor’s money is advanced to safe hands where the risk of loss does not exist. The
elements of character, capacity and capital can help a banker in arriving at a
conclusion regarding the safety of advances allowed by him.
b. Character
It is the most important factor in determining the safety of advance, for there is no
substitute for character. A borrower’s character can indicate his intention to repay the
advance since his honesty and integrity is of primary importance. If the past record of the
borrower shows that his integrity has been questionable, the banker should avoid him,
especially when the securities offered by him are inadequate in covering the full amount of
advance.
It is obligation on the banker to ensure that his borrower is a person of character and has
capacity enough to repay the money borrowed including the interest thereon.
c. Capacity
This is the management ability factor, which tells how successful a business has been in
the past and what the future possibilities are. A businessman may not have vast financial
resources, but with sound management abilities, including the insight into a specific
business, he may make his business very profitable. On the other hand if a person has no
insight into the particular business for which he wants to borrow funds from the banker,
there are more chances of loss to the banker.
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d. Capital
This is the monetary base because the money invested by the proprietors represents their
faith in the business and its future. The role of commercial banks is to provide short-term
capital for commerce and industry, yet some borrowers would insist that their bankers
provide most of the capital required. This makes the banker a partner. As such the banker
must consider whether the amount requested for is reasonable to the borrowers own
resources or investment.
e. Liquidity
Liquidity means the possibilities of recovering the advances in emergency, because all
the money borrowed by the customer is repayable in lump sum on demand. Generally the
borrowers repay their loans steadily, and the funds thus released can be used to allow
fresh loans to other borrowers. Nevertheless, the banker must ensure that the money he is
lending is not blocked for an undue long time, and that the borrowers are in such a
financial position as to pay back the entire amount outstanding against them on a short
notice. In such a situation, it is very important for a banker to study his borrower’s assets
to liquidity, because he would prefer to lend only for a short period in order to meet the
shortfalls in the wording capital. If the borrower asks for an advance for the purchase of
fixed assets the banker should refuse because it shall not be possible for him to repay
when the banker wants his customer to repay the amount. Hence, the baker must adhere
to the consideration of the principles of liquidity very careful.
f. Dispersal
The dispersal of the amount of advance should be broadly based so that large number of
borrowing customer may benefit from the banker’s funds. The banker must ensure that
his funds are not invested in specific sectors like textile industry, heavy engineering or
agriculture. He must see that from his available funds he advances them to a wide range
of sector like commerce, industry, farming, agriculture, small business, housing projects
and various other financial concerns in order of priorities.
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Dispersal of advances is very necessary from the point of security as well, because it
reduces the risk of recovery when something goes wrong in one particular sector or in
one field.
g. Remuneration
A major portion of the banker’s earnings comes form the interest charged on the money
borrowed by the customers. The banker needs sufficient earnings to meet the following:
a) Interest payable to the money deposited with him.
b) Salaries and fringe benefits payable to the staff members.
c) Overhead expense and depreciation and maintenance of the fixed assets of the
bank.
d) An adequate sum to meet possible losses.
e) Provisions for a reserve fund to meet unforeseen contingencies.
f) Payment of dividends to the shareholders.
h. Suitability
The word “suitability’ is not to be taken in its usual literary sense but in the broader sense
of purport. It means that advance should be allowed not only to the carefully selected and
suitable borrowers but also in keeping with the overall national development plans
chalked out by the authorities concerned. Before accommodating a borrower the banker
should ensure that the lending is for a purpose in conformity with the current national
credit policy laid down by the central bank of the country.
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3.18.3 Forms of Loans
In addition to purchase and discounting of bills, bankers in Pakistan generally lend in the
form of cash finance, overdrafts and loans. NBP provides advances to different people in
different ways as the case demand.
a) Cash Finance
This is a very common form of borrowing by commercial and industrial concerns and is
made available either against pledge or hypothecation of goods, produce or merchandise.
In cash finance a borrower is allowed to borrow money from the banker up to a certain
limit, either at once or as and when required. The borrower prefers this form of lending
due to the facility of paying markup/services charges only on the amount he actually
utilizes.
If the borrower does not utilize the full limit, the banker has to lose return on the un-
utilized amount. In order to offset this loss, the banker may provide for a suitable clause
in the cash finance agreement, according to which the borrower has to pay markup/service
charges on at least on self or one quarter of the amount of cash finance limit allowed to him
even when he does not utilize that amount.
b) Overdraft/Running Finance
This is the most common form of bank lending. When a borrower requires temporary
accommodation his banker allows withdrawals on his account in excess of the balance, which
the borrowing customer has in credit, and an overdraft thus occurs. This accommodation is
generally allowed against collateral securities. When it is against collateral securities it is
called “Secured Overdraft” and when the borrowing customer cannot offer any collateral
security except his personal security, the accommodation is called a “Clean Overdraft”. The
borrowing customer is in an advantageous position in an overdraft, because he has to pay
service charges only on the balance outstanding against him. The main difference between a
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cash finance and overdraft lies in the fact that cash finance is a bank finance used for long
term by commercial and industrial concern on regular basis, while an overdraft is a
temporary accommodation occasionally resorted to.
c) Demand Financing/Loans
When a customer borrows from a banker a fixed amount repayable either in periodic
installments or in lump sum at a fixed future time, it is called a “loan”. When bankers allow
loans to their customers against collateral securities they are called “secured loans” and when
no collateral security is taken they are called “clean loans”.
The amount of loan is placed at the borrower’s disposal in lump sum for the period agreed
upon, and the borrowing customer has to pay interest on the entire amount. Thus the
borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending
money in fixed amounts for definite short periods against a satisfactory security
REMITTANCE DEPARTMENT
Remittance means a sum of money sent in payment for something. This department deals
with either the transfer of money from one bank to other bank or from one branch to
another branch for their customers. NBP offers the following forms of remittances.
a) Demand Draft
b) Telegraphic Transfer
c) Pay Order
d) Mail Transfer
Demand Draft
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Demand draft is a popular mode of transfer. The customer fills the application form.
Application form includes the beneficiary name, account number and a sender’s name.
The customer deposits the amount of DD in the branch. After the payment the DD is
prepared and given to the customer. NBP officials note the transaction in issuance
register on the page of that branch of NBP on which DD is drawn and will prepare the
advice to send to that branch. The account of the customer is credited when the DD
advice from originating branch comes to the responding branch and the account is
debited when DD comes for clearance. DD are of two types.
a) Open DD: Where direct payment is made.
b) Cross DD: Where payment is made though account.
NBP CHARGES FOR DD
I. Up to Rs. 50,000/- is Rs 50/- only
II. Over Rs. 50,000/- is 0.1%
Pay Order
Pay order is made for local transfer of money. Pay order is the most convenient, simple
and secure way of transfer of money. NBP takes fixed commission of Rs. 25 per pay
order from the account holder and Rs. 100 from a non-account holder.
Telegraphic Transfer
Telegraphic transfer or cable transfer is the quickest method of making remittances.
Telegraphic transfer is an order by telegram to a bank to pay a specified sum of money to
the specified person. The customer for requesting TT fills an application form. Vouchers
are prepared and sent by ordinary mail to keep the record. TT charges are taken from the
customer. No excise duty is charged on TT. The TT charges are:
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Telegram/ Fax Charges on TT = Actual-minimum Rs.125.
Cable telegram transfer costs more as compared to other title of money. In cable transfer
the bank uses a secret system of private code, which is known to the person concerned
with this department and branch manager.
Mail Transfer
When the money is not required immediately, the remittances can also be made by mail
transfer (MT). Here the selling office of the bank sends instructions in writing by mail to
the paying bank for the payment of a specified amount of money. Debiting to the buyer’s
account at the selling office and crediting to the recipient’s account at the paying bank
make the payment under this transfer. NBP taxes mail charges from the applicant where
no excise duty is charged. Postage
charges on mail transfer are actual minimum Rs. 40/- if sent by registered post locally
Rs.40/- if sent by registered post inland on party’s request.
HUMAN RESOURCE MANAGEMENT
Human Resource plays a vital role in the success of every service organization. They
interact between man and machine. Their attitude can win or loose the customer. The
positive attitude could only be created in a conducive environment, which can make the
staff dedicated towards the organization and its objectives. In reality the man is more
important than machine as it is the human which could get maximum out of machine to
keep a happy customer. However, most organizations give little importance to this very
important asset.
Various aspects related to human resource of National Bank of Pakistan are critically
examined in the following text:
Selection & Recruitment
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Although the Bank believes in merit but in practice the selection of employees is not
done on merit. Most of the employees are low educated. This shows that candidates with
some strong family background or political pressure are given preference in recruitment
and qualified candidates are sometimes left behind.
Job for Life
Like the employee of public sector organizations in Pakistan, the employees of NBP also
enjoy their job for life. Since there is no risk of early retirement or redundancy in rank,
they do not perform with their full potentials. This is one redundancy in rank, they do not
perform with their full potentials, and this is one of the reasons responsible for the low
productivity of the employees of the Bank.
Performance Appraisal
The performance of employees of the Bank are appraised though their annual confidential
reports at the end of each year. This has become an outdated method of performance
appraisal and no longer used due to the following reasons:
1. The performance of employees is evaluated after quite a long time.
2. Element of subjectivity is involved in this method.
3. Employee’s participation is not ensured in the process of evaluation.
4. Objectives of employee’s are not quantified.
Inter Personal Relationship
Modern management acknowledges human resources as one ‘of the most important
assets of an organization. But by their very nature, human beings are also the most
unpredictable. Where a number of persons work together, interactions among them, of
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necessity, will lead to conflicts and NBP is no exception. Most interpersonal conflicts in
NBP can be traced back to the following major heads.
Lack of Communication
Lack of communication is for the biggest reason for conflicts. Not only it is due to the
failure to send a massage but to an interpretation given to the massage by the receiver is
different from that intended.
Diversity in Values
Diversity in values, perceptions, cultural background and life-style is another reason
responsible for inter personal conflicts in NBP. Different values and perceptions about
the same issue, event or personality hinder understanding. When things come to such a
pavement, therefore, interpersonal conflicts are generated.
The dominant trend in all modern industrial societies of the world is merit and expertise,
which helps promote cohesion and reduce conflicts. But the feudalistic mindset is still
very strong in our set up and there is no tradition of tolerance for differing viewpoints.
Hence, interpersonal conflicts are generated.
Corruption
Our social acceptance of corruption gives rise to corruption at every level of social and
organizational set up. Corruption involves financial embezzlement, favoritism, nepotism,
and other number of such practices. All these cause resentment that keep building up and
lead to conflict sooner or later.
In the past few years, some cases of frauds have happened in different branches. The
reasons can be linked with the employee dissatisfaction of NBP.
3.20.7) Discipline & Authority
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Maintaining discipline and implementation of authority (tables) in letter and spirit is the
key to success of any organization. In NBP, The authority tables are not strictly
maintained. Line managers are not fully equipped with the authority with no vertical or
horizontal interference.
3.21) DEPOSIT DEPARTMENT: -
It controls the following activities:
a) A/C opening.
b) Issuance of chequebook.
c) Current a/c
d) Saving a/c
e) Cheque cancellation
f) Cash
Account opening
The opening of an account is the establishment of banker customer relationship. Before a
banker opens a new account, the banker should determine the prospective customer’s
integrity, respectability, occupation and the nature of business by the introductory references
given at the time of account opening. Preliminary investigation is necessary because of the
following reasons.
i. Avoiding frauds
ii. Safe guard against unintended over draft.
iii. Negligence.
iv. Inquiries about clients.
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There are certain formalities, which are to be observed for opening an account with a bank.
Formal Application
Introduction
Specimen Signature
Minimum Initial Deposit
Operating the Account
1. Pay-In-Slip Book
2. Pass Book
3. Issuing Cheque Book
a) Qualification of Customer
The relation of the banker and the customer is purely a contractual one, however, he must
have the following basic qualifications.
He must be of the age of majority.
He must be of sound mind.
Law must not disqualify him.
The agreement should be made for lawful object, which create legal relationship
Not expressly declared void.
b) Types of Accounts
Following are the main types of accounts
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1) Individual Account
2) Joint Account
3) Accounts of Special Types
Partnership account
Joint stock company account
Accounts of clubs, societies and associations
Agents account
Trust account
Executors and administrators accounts
Pak rupee non-resident accounts
Foreign currency accounts
Issuing of chequebook:
This deptt issue cheque books to account holders.
Requirements for issuing chequebook
a) The account holder must sign the requisition slip
b) Entry should be made in the chequebook-issuing book
d) Three rupees per cheque should be recovered from a/c holder if not then debit
his/her account.
e) Current account
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These are payable to the customer whenever they are demanded. When a banker accepts
a demand deposit, he incurs the obligation of paying all cheques etc. drawn against him
to the extent of the balance in the account. Because of their nature, these deposits are
treated as current liabilities by the banks. Bankers in Pakistan do not allow any profit on
these deposits, and customers are required to maintain a minimum balance, failing which
incidental charges are deducted from such accounts. This is because the depositors may
withdraw Current Account at any time, and as such the bank is not entirely free to
employ such deposits.
Until a few decades back, the proportion of Current Deposits in relation to Fixed
Deposits was very small. In recent years, however, the position has changed remarkably.
Now, the Current Deposits have become more important; but still the proportion of
Current Deposits and Fixed Deposits varies from bank to bank, branch to branch, and
from time to time.
Saving account
Savings Deposits account can be opened with very small amount of money, and the
depositor is issued a chequebook for withdrawals. Profit is paid at a flexible rate
calculated on six-month basis under the Interest-Free Banking System. There is no
restriction on the withdrawals from the deposit accounts but the amount of money
withdrawn is deleted from the amount to be taken for calculation of products for
assessment of profit to be paid to the account holder. It discourages unnecessary
withdrawals from the deposits.
In order to popularize this scheme the State Bank of Pakistan has allowed the Savings Scheme for school and college students and industrial labor also. The purpose of these accounts is to inculcate the habit of savings in the constituents. As such, the initial deposit required for opening these accounts is very nominal.
Cheque cancellation:
This deptt can cancel a cheque on the basis of;
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a) Post dated cheque
b) Stale cheque
c) Warn out cheque
d) Wrong sign etc
Cash
This deptt also deals with cash. Payment of cheques, deposits of cheques etc.
FOREIGN EXCHANGE/DEPARTMENT:
This deptt mainly deals with the foreign business. The main functions of this deptt are:
a) L/C dealing.
b) Foreign currency accounts dealing.
c) Foreign Remittance dealing.
L/C dealing
NBP is committed to offering its business customers the widest range of options in the area
of money transfer. If you are a commercial enterprise then our Letter of Credit service is just
what you are looking for. With competitive rates, security, and ease of transaction, NBP
Letters of Credit are the best way to do your business transactions.
Foreign currency account dealing:
This deptt deals with the foreign currency accounts which mainly include dollar account,
euro account etc.
Foreign Remittance dealing.
This is very important function of this deptt.
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B) DEPARTMENTATION OF Rahwali Branch Gujranwala NBP.
Dividing an organization into different parts according to the functions is called
departmentation. So NBP Balakot Branch,Balakot is divided into two main parts.
1. Cash Department
2. General Banking Department.
Cash Department:
“To facilitate people in the payments of their bills and taxes and repayments of cash”
There are two main functions of cash department.
i. Payment ii. Receipts
i. Payments are the function that they pay their cheques and pay cash.
ii. Receipts mean collection of utilities bills, taxes etc.
General Banking
In this section of the bank the general banking function is performed. It is divided into
five departments
Marketing Department
Remittances Department.
Computer Department.
Advances
Establishment Department Department.
Clearing Department..
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Remittances Department:
The objective of this department is:-
“To transfer the money of people from one place to another place in safe and comparable
way”
The main functions of this department are:
i. Issuing of demand draft.
ii. Issuing of Mail transfer.
iii. Issuing of Telegraphic transfer.
iv. Issuing of payment order.
v. Issuing of call deposit.
vi. Pension payments etc.
vii. Closing and scrolling of government collections.
Advances department:
Every bank has a department, which advances money to borrowers. The objective of Advances Department is
“To facilitate people by giving short term and long term loans on easy terms and
conditions”.
The main function of this Department is to take surplus money from the people at low
rates and lend this money to borrowers at high rates to earn profit.
Clearing Department:
A clearinghouse is an association of commercial banks set in State Bank of
Pakistan for the purpose of interchange and settlement of credit claims.
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The objective of this department is to
“To facilitate customers for payment their Cheques of other banks”.
Two type of clearing books are maintained.
i. In word clearing books:
The bank uses this book for the purpose of recording all the cheques that are
being received by the bank in the first clearing. All detail of the cheques are recorded in
this book.
ii. Out word clearing book:
The bank uses outward clearing register for the purpose of recording all the details of
the cheques that the banks have delivered to other banks.
Computer Department:
The objective of this Department is to facilitate customers in payment of their cheques”.
The main functions performed by this department are:
a) Checking balance.
b) Deduction from balance on clearing cheques.
c) Issuing bank statements.
d) Dealing Western Union.
Establishment Department:
This department mainly deals with the branch employees. The main objective of this
department is to
“To regulate bank business”.
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Main functions of this department are:
a) Keeps the record of attendance of employees.
b) Employee’s salaries distribution.
c) Employee’s bonuses etc.
3.2. Current Staff:
3.2.1) Current Staff of the branch according to Qualification and :
Names Designation Qualification
Mr. ZeeshanBranch Manager
M.A
Mr. Muhammad
Qasim Operational
managerB.A
Mr. Bilal Ahmad KPO(kep Punch
operator)B.A
Miss. Shumaila
RanaCash Officer B.COM
Mr. Muhammad
Nazim Cash Officer B.COM
Miss. Arifa Haroon CSO(Customer
Service Officer)B.COM
2 guards
1 sweeper
1 night guard
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1 tea boy
3.2.2. Training received by no. of employees?
NBP has different training programmes which are offered in Lahore, Gujranwala and
Gujrat. In Lahore training is provided at Staff College and in Gujranwala at circle office
and in Gujrat at zonal office. According to the schedule mails are sent to the branches and
training is provided to branch manager, operations manager and cash officer etc. For
example when NBP started operations with SYMBOL software for its operations in all
branches then staff of Rahwali Branch branch was also given training.NBP provides
training to its employees when it wants to make aware its employees with new projects
and also wants to introduce with different operations relating to Remittances, Demand
Draft, KYC (know your customer) and Anti-Money Laundering etc.
3.2.3. Work load (it is based on number of hours worked)
Almost in all banking sectors timings of working is 9am to 5pm.so MCB being a bank
also performs its operations from 9am to 5pm.
3.2.4. Salary Structure?
Branch Manager Rs.55000
Operational Manager Rs.20,000
KPO(key punch operator) Assistant Rs.28,000
Cash Officer(cash operations) Rs.12,000
Cash officer(cash operation) Rs.12,000
CSO(customer service officer) Rs.10,000
3.2.5. Promotion system
As promotion is concerned at NBP it is given on the basis of performance.
3.2.6. Incentives and Motivation
In NBP employees are motivated by offering bonuses, as well as annual increments also
motivate employees. Medical allowances also motivate employees. Hajj and Umrah facilities are
provide on the basis of lucky draw.
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3.2.7. Responsibilities and Duties performed
In NBP Rahwali branch working is divided into employees for efficient completion of the
operations by the employees having relevant knowledge and abilities as well as experience
Problems faced by branch:
During my internship at this particular branch of national bank of Pakistan, there are
following problems I have found which are directly affect on efficiency and performance
of the bank. There problems are also called as an internal problems. So these are
discussing below.
1. Lack of communication among the employees:
During the period of my internship I found this problem as a biggest problem that, they
are not very effective in communication between themselves. They do not share the
experience with each other and do not care the other employee. If one employee has a
problem, then he asked to other, but he does not give clear solution to that problems.
They are shows the facial expressions against each other. Pension manager and other
employees are always tried to gain cash/performance award and use the references to get
it. They are talk against each other in front of me. So finally it is very needy for a public
services organization to keep atmosphere friendly among the management and
employees. National bank of Pakistan (Tech Society Branch) is lack in communication
skills among the employees.
2. Ineffective public dealing:
There is also a big issue that they think its government’s bank so it does not care
customers. It is a wrong perception. There must be a good public dealing in public
service organization. If one customer asked a question twice. They angry on him and stop
working. I personally experienced in pension department. The manager pension (Mr.
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Iqbal) have no respect to the old pensioner and he used wrong wording against them
same is also happened in bills executive in bills (Mr. Shafique) is also angry on
Customers, when they asked question twice, so there should be solve this problem to
create a good environment of the NBP.
3. Lack of commitment:
Lack of commitment is also a bib problem faced by the national bank of Pakistan (wahdat
road branch). Employees are not committed to the work and their duties. This is very
common problem.
For example, Rao Ikhlaq not received the letters from last two months. ATM machine is
under Rao Ikhlaq but it is run by operation manager. Mr. Kamran not attached the scroll
at time. Mr. Qamar Zaman going on leave of 3 days but he does not come back even after
3 weeks. So internees are performed duties on his seat. So employees are not very
committed to their jobs and duties. Top management is also not very committed to this
branch. They are not provided employee after transfer of the Rao Ikhlaq. One executive
on leave while other transferred. But not a single executive provide to the branch finally
it is conclude that there is a lack of commitment from employees and top management
also from employees and Top management also.
4. Low Efficiency of employees:
Efficiency of employees is also low at this branch. For example Mr. Qamar Zaman Aulik
has 10 years experience at national bank of Pakistan but he is not professional even at
single seat in the bank. Where he assign the result is zero. During my internship firstly he
works in advances. He does not sent returns to head office at last dates. 95% of returns
are not sent to the regional head quarter. So he was not too much professional. After this
he assign in passing the cheques but results are same (zero). So for this efficiency is very
low at this branch.
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5. Not very regular and punctual:
Regularity and punctuality shows the character of a big and good executive. But this
problem is also faced by the NBP (Wahdat road) many executive not come at time.
For example Mr. Saeed compliance officer came 10 A.M. While bank is started at 9AM.
So some other executives are also not coming at time. So there must be solved that
problem by the Top management.
In regional head quarter Mr. Munawir Shah is HRM assistant manager is also come at 10
Am.
6. lack of computing skills:
Computing skills are also low, some executive are very efficient in computing skills but
some are not totally aware from this system. For example ATM machine at this branch is
only handled to Mr. Imran operation manager. When operation manager is on leave due
to heart patient, ATM machine is off not worked because no body knows to run this
machine. Western Union is not worked effectively. The person who handled western
Union is careless and other employees are not taken interest in tat field. So there is
western Union for just name actually it does not worked.
7. Misuse of resources:
Resource are very needy, so there must be avoid to misuse the resources but in this
branch it is reverse case, there is very wrong use of the resources, employees does not
take care of resources and not used them in right direction. For example wrong printing,
extra printing, after service time Mr. Hasnain at token used telephone almost one to two
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hours to take personally outside the bank. So these are the real problems which are faced
by the bank.
Finally it is suggested that if these problems are solved there are much more chances for
increase the performance of NBP. Particularly this branch.
3.3. Functions of NBP
Since NBP is a commercial bank, it performs a variety of functions.
Like other commercial banks, NBP is engaged in financing international trade. Its other
major functions include receiving deposits, advancing loans and discounting of exchange.
The functions performed by NBP are:
Accepting Deposits
This function is important because banks largely depend on the funds deposited with
them by its customers. Deposits are of many types:
i. Current deposits
Current deposits are also called demand liability on current deposits. NBP pays
practically no interest on current deposits. Businessmen usually open current accounts. In
NBP current account can be opened with a minimum amount of Rs.500/-.
PLS saving deposit
Profit and loss sharing deposits (PLS) are also called checking accounts. One can deposit
and draw money easily. Profit on PLS is calculated every month but paid after six
months. PLS account can be opened with a minimum amount of Rs.500/-
iii. PLS term deposits
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Fixed term deposits are deposits with the bank for certain fixed period before the expiry of
which they cannot be withdrawn unless giving due notice. In this case the rates of profit
will be different depending upon the time period.
Discounting bills of exchange
Discounting of bill is practically speaking lending for exchange at their market rate i.e. it
pays to holder of the bill an amount equal to the face value after deducting interest at the
current market rate for the period. This bill has to be mature. This is the common way
used for keeping a part of assets of the bank in a liquid form.
Agency service
NBP also provides best and unique service to its valued customers. NBP provide the
following agency services to the customers:
i. Collection of dividends
As NBP deals with the purchase and sale of various types of securities, therefore NBP
also provide dividend or interest earned on share or bonds or invested money.
ii. Collection of Cheques
In the collection and payment of Cheques, bills and promissory notes etc. National bank
of Pakistan acts as an agent for its customers.
iii. Acting as an agent
NBP also acts as an agent correspondent or representative for its customer at home or
abroad.
iv. General utility services:
Utilities provided by NBP are as follows:
a. Clearance of utility bills
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NBP provides the service of clearing the utility bills i.e. electricity, gas and telephone
bills of its customers. For this purpose it also provides evening banking services
b. Lockers facility
National bank of Pakistan also provides locker facilities to its customers to keep their
valuable assets in it. The charges of different size of lockers are different.
c. Acts as a referee
NBP provides useful services to its customers by acting as a referee to their credit
worthiness.
d. Supply of information
NBP provides operational and advisory service for foreign exchange accounts/activities.
Unmatched Banking Facilities
Deposit security, Guaranteed by Government of Pakistan.
Highest rates of return to attract the savings.
Lowest rates on exports and other borrowings.
Largest contribution towards Government and Semi-Government
requirements.
Agents of the SBP handling Treasury Functions, receipts of Taxes & other
Revenues.
Handling of salaries & pensions of federal/provincial/defense personnel.
Utility Bills collections.
Hajj arrangements.
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Sale and encashment of prize Bonds.
Sale and encashment of Defense Savings and Special Savings Certificates.
Safe Deposit Lockers for customers.
Rational Human Resource Management.
The prestigious periodical “The Banker” UK recognized NBP as the best bank for 2001-2002
and NBP is the bank of the year for 2004-2004 of Pakistan.
i. AAA rating awarded JCR-VIS Credit co. Ltd and affiliated of Japan Credit Rating
Agency for 2001.
ii. AAA+1 rating awarded JCR-VIS Credit Co.Ltd and affiliated of Japan Credit Rating
Agency for 2002
3.3.3. Morale Of staff
As I have observed and experienced the staff of the branch where I have spent 6 weeks
for internship the behavior of the staff towards customers is much cooperative and
lenient. The staff has high morale. They work with devotion. As Rahwali is not as
developed as a city and most of the customers are from villages and they are illiterate
people so proper guidance for banking transactions is needed. These people are less
familiar with bank dealings so the staff of NBP is very accommodating. The staff is not
only supportive to the customers but also it follows the rules and regulations that are
directed by the HEAD OFFIC.As for as I am concerned that how they had dealt with me
during my internship, I would like to say that they are much accommodating people but
within the limits of their duties and authorities.
3.3.4. Physical facilities
As for as physical facilities are concerned NBP has excellent buildings especially in cities
as for as Rahwali branch is concerned I would like to say that it is only best branch with
respect to working as well as environment. Required furniture is available and room’s
size is small. The branch has only 2 rooms and 1 hall,1 room is for lockers and the 2 nd
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room is for bank’s old documents and also for cash deposits of bank which is kept
according to the limits stated by SBP (state bank of Pakistan).And staff of the bank
perform their duties by sitting in the hall. Proper ventilation system is there and hall and
rooms are air conditioned.
3.4. Performances
(In terms of quality through customer satisfaction)
NBP is providing quality services to its customers. it have also introduced online banking
that has made transfer of money and funds much easy and comfortable. Customers are
satisfied with its services. Rupees travelers Cheques are also performing important role
by satisfying customer’s needs. Quick services performed by staff also satisfy
customers.NBP has huge networking throughout the Pakistan. SYMBOL software is vey
speedy for online services.
Summary:
To summarize this chapter it can be said that this chapter is all about the organization
office in which internship has been done. What functions are being performed within that
branch? History of the branch mentioned in this chapter. How the changes in policies are
communicated to the different branches. Qualification of the staff and also their
experience has also been mentioned. It is also mentioned that how much quality the
branch has in terms of performance, number of accounts, and also in terms of customer
satisfaction. Morale of the staff has also been elaborated in this chapter. Branch location
and physical facilities within the branch has also been discussed.
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CHAPTER FOUR: Specialization Areas
This chapter is about the policies of the organization. Different policies are formed by the
organizations for performing well and also for smooth working of the organization. These
policies are transmitted by the HEAD OFFICE through Fax, E-mails, and also through
Circulars. A competitive strategy of the bank has also been elaborated in this
chapter.NBP awards have also been described here. More of the policies are related to
daily operations of the organization. Principles of performance have also been mentioned
such as customer focus, employee respect and also team based approach. Specific
functions of the branch and also routine working and dealings of the branch have been
explained.
4.1. Policies:
Privacy Policy
These terms apply to your access and use of NBP's website (the "Site") accessible
through NBP home page located at www.nytricbp.com.
We (NBP) understand the importance of providing you with information concerning the
collection and use of data collected from you during your visit to our website. Our
privacy policy is set forth below. This policy may be updated from time to time and we
encourage you to check this page periodically for any updates.
Definitions. Some helpful definitions of terms used in this privacy policy are:
Personal information is information that can be used to uniquely identify you personally.
Examples of personal information include your name, mailing address, telephone
number, email address and credit card number where applicable.
Links to other sites. The Site may contain links to websites and services that are operated
by persons or companies other than NBP. NBP is not responsible for the content of any
linked site or any link contained in a linked site. NBP reserves the right to terminate any
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link at any time. NBP linking to a third party's site does not represent NBP endorsement
of such website, or the person(s) or company associated with such website or any
products or services accessible through such website. If you decide to access any such
third party website, you do so at your own risk and NBP encourages you to review the
terms of use, if any, applicable to such websites.
Anonymous information is information that can not be used to uniquely identify you
personally. Examples of anonymous information include your IP address, the type of
browser software you use when visiting our site, the date and time you visit our site and
what pages you viewed when visiting our site.
Collection and Use of Anonymous Information.
You can visit our website without telling us who you are or revealing any personal
information to us. During your visit, we may collect certain anonymous information. For
example, we may track the number of visitors to our website by logging Internet Protocol
(IP) addresses. We may keep track of what pages are visited on our website so we can
monitor the performance and usage of our website. Also, we may pay attention to what
visitors do and do not use on our website in order to assess the effectiveness of our
website and modify our content or design appropriately. Anonymous information may be
used individually or aggregated with other anonymous information. We may use
anonymous information for our own benefit and we may share anonymous information
with other companies.
Collection and Use of Personal Information.
We collect personal information about you only when you elect to provide such
information to us, such as when you register to receive products or services, request
additional information from us, submit your resume, or submit an email to us. The
information collected might include your name, company name, e-mail address, mailing
address, phone numbers, etc. Any personal information collected will be used solely for
the purpose(s) for which it was collected (for example, to send you additional information
about our products or services that you requested) unless you indicate otherwise. The
personal information you provide to us may be shared with other companies with which
we have relationships in order to complete your request or provide you with the products
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or services which you have requested. We may also enlist a third party to collect, store,
process and manage on our behalf any personal information you elect provide to us.
When we use other companies to perform services on our behalf, we will require that
such companies protect your personal information consistent with this policy.
In addition, from time to time, we may offer you the opportunity to receive information,
products or services directly from a third party. If you elect to receive such items, we may
share with such third party any of your personal information that was collected when you
elected to receive such items.
We may process or store your personal information in our databases located in the
Canada or any other country in which we do business.
We may disclose personal information when we have reason to believe that disclosing
this information is necessary to identify, contact or bring legal action against someone
who may be violating the terms and conditions of our website or may be causing injury to
or interference with (either intentionally or unintentionally) our rights or property or
anyone else that is being harmed by such activities. We may disclose personal
information when we believe in good faith that the law requires it and for other
governmental administrative, regulatory or law enforcement.
Principles of Performance
Performance Appraisal of National Bank of Pakistan
The system
by which organizations evaluate individual job performance. More over it is about the
employee performance and the accountability. As the world is now global village and
your competitor is watching you, so the organizations need high performance. At the
same time the employees need back on their performance guide for their future behavior.
So the output of the organization depends upon the feedback provided to the employee
timely. Especially the newcomer to the organization needs to understand their jobs and
their work setting. The longer-service employees also want positive feedback on the good
things they do. So the NBP is a organization where the management feels about the
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employees.
The employees feel sense of belongingness in return. HRD section always takes this
opportunity to evaluate the performance of the employees. The appraisal system also
helps the management of the NBP to help the managers with placement, pay, and other
HR decisions. The HRD section of the NBP carries out the appraisal for the following
uses;
It allows the employee, the Manager to take necessary about the improvement of the
performance.
The system also helps in promotion and pays increase of the deserving employees after
their evaluation and also prepares the next person for the succession plan.
4.2. Strategies of NBP
COMPETITIVE STRATEGY
Banking industry in Pakistan is progressing in leaps and bounds and with this drastic
increase in number is raising the bar of competition amongst the banking sector. Last
year the better half of the foreign direct investment was in the banking sector. To stay in
this incredible amount of pressure of competition and delivering the goods on the
deadlines to obtain customer satisfaction and loyalty is the need of the hour and National
bank has always proved itself in distant times by providing the cheapest interest rates on
loans given to the corporate world, employees of government institutions in terms of
Advance Salaries and to farmers made the bank to stand tall in the competition and
contributed a lot to the competitive strategy of the bank. They are mainly using the
Market Penetration Strategy to attract customers.
BUSINESS PROCESS ANALYSIS
After working in that environment of National Bank of Pakistan I found following
points in analyzing Business Process of the Organization.
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Well-defined tasks and duties
The tasks and duties are defined in such a way that it becomes very easier for the
employees to perform their assigned tasks. Due to the implementation of modern
techniques the efficiency and accuracy of the work force has been greatly increased.
Proper supervision
There is a proper supervision system to check and evaluate the performance of each
employee. It is the duty of Operations Manager to make sure that every employee is
giving the desired performance.
Caring environment for the customer
The environment of the bank is caring for the customers and every customer is dealt with
proper care and attention. All the employees have very professional attitude and know the
worth of the customer for the business.
Cooperative and Supportive Staff
The behavior of the staff with the customers is very cooperative and supportive and every
employee is ready to facilitate the customer on his best in order to increase the
customers’ satisfaction level.
Lack of customer relationship desk
It was observed that there was no customer relationship officer in the branch to guide the
customer to solve their problems and to tell them that what should they do and where
should they go for the solution of their problems. As a result the customers keep on
disturbing all the employees in order to get their problem solved. This results in the
decrease in the employees’ concentration on their jobs.
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4.3. Successes:
Employee dedication core factor behind Success: President NBP
Karachi, President NBP, S. Ali Raza, while highlighting the progress made by NBP over
the last few years, stated that it would not have been possible had NBP employees not
stood up to the challenges and performed with dedication and hard work.
The National Bank’s President Ali Raza addressing the bank employees at a ceremony to
mark the completion of 60 years said that the Bank has also not ignored the contribution
of its employees towards turning around the Bank into a viable commercial organization.
In this regard the Bank has taken unprecedented steps for the welfare of its employees in
the recent past. Some of these initiatives include induction of 3000 temporary and
foundation employees in the regular cadre of the Bank, liberal promotions in all cadres,
rise in pay by over 200% since 2002, payment of record bonuses to employees, enhance
benefits in medical and staff loans, employment to children of deceased and retired
employees and regular increase in the pension of retired employees. President Ali Raza
emphasized the need of dedication and devotion to all employees of the Bank so that its
number One position in the country is maintained.
Summary
By summarizing this chapter it is important to mention here that NBP has policies that
are implemented in all its branches. These policies are like to meet the basic requirements
of opening an account, to fill the KYC (know your customer) form, requirements for
Online transactions etc. In CB successes different types of awards have been described
that have been received by NBP bank from last few years. Competitive strategies of NBP
have also been mentioned such as, to make online transactions fastest etc. And also the
placing strategies of NBP bank that are to enlarge the branch network within Pakistan as
well as outside the Pakistan. At present NBP have branches out of the country.
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CHAPTER FIVE: Analysis of MCB
This chapter is about the major analysis of the MCB. For the accomplishment of the
requirement of the internship report I describe major analysis on the organization, is
SOWT analysis. The SWOT analysis shows that the companies has many strengths like
strong financial position of the owner of the company, the successful history and
experience of the NBP, well furnished and well located office and the skilled and
qualified employees. The weak points are decreasing rate of EPS, lack of international
reorganization etc. Its main opportunity is the increasing trend of big businesses that
require more cash from the banks and its main threat is the increasing No of new banks
and entrance of foreign banks in Pakistan.
5.1. SWOT Analysis:
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To carryout the SWOT and Financial Analysis of NBP through the help of calculating
necessary ratios in this section.
SWOT analysis is an acronym that stands for strengths, weakness, opportunities, and
threats SWOT analysis is careful evaluation of an organization’s internal strengths and
weakness as well as its environment opportunities and threats.
“SWOT analysis is a situational which includes strengths, weaknesses, opportunities and
threats that affect organizational performance.”
“The overall evaluation of a company strengths, weaknesses, opportunities and threats is
called SWOT analysis.”
In SWOT analysis the best strategies accomplish an organization’s mission by:
1. Exploiting an organizations opportunities and strength.
2. Neutralizing it threats.
3. Avoiding or correcting its weakness.
SWOT analysis is one of the most important steps in formulating strategy using the
organization mission as a context; managers assess internal strengths distinctive
competencies and weakness and external opportunities and threats. The goal is to then
develop good strategies and exploit opportunities and strengths neutralize threats and
avoid weaknesses.
STRENGTH
OLDEST INSTITUTION:
NBP is one of the oldest bank of Pakistan and first nationalized bank Hence its customer
base is strength from this plus point as customers have more confidence in the bank. The
additional value services as the privilege for the bank.
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ALTERNATE DUTIES IN SBP ABSENCE
The NBP performs additional services for its customers as well as the other bank
customer in the absence of SBP.
MORE DEPOSITS THAN OTHER BANKS
NBP has the relative competence in having more deposits than the other bank. This is
because of the confidence the customer have in the bank. The bank being the privileged
and oldest bank in banking sector of Pakistan enjoys this edge over all others, lacking it.
EMPLOYEE BENEFITS
The employers at NBP are offered reasonable monetary benefit. Normally two bonuses
are given Eid-Ul-Fitar & Eid-Ul-Azha. This serves as an additional benefit and
competency for the bank and a source of motivation for the employees.
BROAD NETWORK
The bank has another competency i.e. it has broad-basses network of branches throughout
the country also more than one branch in high productive cities. The customers are
provided services at their nearest possible place to confirm customer satisfied.
STRICTLY FOLLOWED RULES & REGULATION:
The employees at NBP are strict followers of rule & regulation imposed by bank. The
disciplined environment at NBP bolsters its image and also enhances the over all out put
of the organization.
PROFESSIONAL COMPETENCE
The employees at NBP here have a good hold on their descriptions, as they are highly
skilled Professionals with background in business administration, banking, economics
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etc. These professional competencies enable the employees to understand and perform
the function and operation in better way.
HEALTHY ENVIROMNMENT
The working condition in the NBP branch here is very conductive and favorable for
better output. The informal environment affects the performance of the employees in a
positive way.
RELATION BETWEEN STAFF AND OTHER EMPLOYESS
The bank enjoys a good plus point when it comes to the employee manager relationship
the hearing as removing of discrepancies if any, between the employees, and between the
manager and employees.
WEAKNESSES
LACK OF MARKETING EFFORT:
The bank does not promote its corporate image, services, etc on a competitive way.
Hence lacks far behind in marketing effort .A need for aggressive marketing in there in
the era marketing in now becoming a part of every organization.
NBP UNDER POLITICAL PRESSURE
The strong political hold of some parties and government and their dominance is
affecting the bank in a negative way. They sometime have to provide loan under the
pressure, which leads to uneven and adjusted feeling in the bank employees.4.3.3
FAVORITISM AND NEPOTIS
The promotions and bonuses etc in the bank are often
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powered by senior’s favoritism or dependupon their wills and decision. This adds to the
negative factors, which denominate the employees thus resulting in affecting their
performance negatively.
LACK OF FINACIAL PRODUCT
The bank falls far behind when the innovative and new schemes are considered. It has not
been involved in the tug of war between the competitors to the accounts and strengthens
the existing customer base. This stands out to be the major incompetence and weakness
of the banks.
INEFFICIENT COUNTER SERVICES IN THE RUSH HOURS
During the rush hours, the bank is founded out to be a total flop to handle the mob of
people peaking from windows and doors. The bank has deficiency to operate in the stages
of rush hours where the people find them services entangled in a situation of nowhere
because they are not well served.
LACK OF COMPUTERIZED NETWORK
The bank lack the strength of being powered by the network of computers, which have
saved time, energy and would have lessened the mental stress, the employees have
currently. This would add to the strength if it were powered by network of computers.
LACK OF MODERN EQUIPMENT
The bank lacks the modern Equipment that is note counting machine computers. Even if
there is any equipment they lack to fall in the criteria of being rearmed as update and
upgraded
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UNEVEN WORK DISTIBUTION.
The workload in NBP is not evenly distributed and the workload tends to be more on
some employees while others abscond away from their responsibilities, which server as a
demotivation factor for employees performing above average work.
OPPORTUNITIES
1 ELECTRONIC BANKING
The world today has become a global village because of advancement in the
technologies, especially in communication sector. More emphasis is now given to avail
the modern technologies to better the performances. NBP can utilize the electronic banking
opportunity to ensure on line banking 24 hours a day. This would give a competitive edge over
others.
MICRO FINANCING
Because of the need for micro financing in the market, there are lot of opportunities in
this regard. Other banks have already initiated, now the time has arrived when the NBP
must realize it and take on step to cater an ongoing demand.
THREATS
EMERGENCE OF NEW COMPETITORS
The bank is facing threats with the emergence of new competitors especially in terms of
foreign banks. These foreign banks are equipped with heavy financial power with
excellent and innovative ways of promoting and performing their services. The bank
has to take initiative in this regard or will find itself far back in competition.
POLITICAL PRESSURE BY ELECTED GOVERNMENT
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The ongoing shift in power in political arena in the country effects the performance of the
bank has to forward loans to politically powerful persons which create a sense of
insecurity and demoralization in the customer as well as employees.
DOWNSIZING
The bank is currently acting upon the policy of downsizing which threaten the
environment of the bank Employees feel insecurity in doing their jobs and work, hence
affecting the over all performance of employees negatively.
CUSTOMERS COMPLAINTS
There exists no regular and specific system of the removal of customer complaints. Now
a day a need for total customer satisfaction is emerging and in their demanding
consequences customer's complaints are ignored.
COMPETITIVE ANALYSIS
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Porter’s five forces model:
This approach is widely used for competitive analysis. It is because of the high intensity
of competition among companies there five main competitive forces.
Rivalry among competitive firms:
It is a very powerful force among the competitive forces the strategies pursued by
one firm can be successful only to extent that they provide competitive advantages
over the competitor. These competitive strategies may be lowering prices, best quality
series. The NBP offering very low charges an demand draft, telegraphy transfer, mail
transfer and give other additional services to the customers and to the Nation.
Because NBP is a “Nation’s Bank”.
Potential entry of new competitors:
Whenever new firms ca easily enters a particular industry, the competition increases.
The gout restriction, tariffs, patents etc can stop new firm to enter into the business as
per Banking industry is concerned this market is already very situated in Pakistan and
there are banks with quality services and low charges. So there is no threat to NBP
from potential entry and NBP is also a public sector bank because of that no other
new bank not takes over it.
Potential Development of substitute products:
This is the third factor affecting the competitions. There may be some other product
can be substitute the product of that industry. For example banks offering sawing
schemes in Pakistan and these schemes are also offered by GPOs in Pakistan so they
must compete them in this field. If they offer low rates than GPOs so people will go
to deposit in GPOs. People concentration high rates so that’s why sawing PLS
accounts are more then current accounts. The next examples will ATM which
substitute presenting cheques at counter and encash it. The NBP is lacking in this
field. It must improve in this field to compete the competitors.
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Bargaining Power of Suppliers:
The bargaining power of supplier affects the intensity of competition, especially when
there are a large number of suppliers. In case of banks the suppliers are customers
they supply the money to banks. Now they must offer good services, quality, and
safety. Low charges etc to customers. In this field NBP is very good. B/C at offers
good quality services to customers. They charge low charges on remittances. So that’s
it is a competition to other banks.
Bargaining Power of Consumers:
When customers are concentrated or large, or buy in volume, their bargaining power
represents a major force affecting intensity of competition. Now the number
customers in Pakistan for banks are very high. Banks offering variety of products and
services to their customers. NBP have a large number of customs. Now it must offer
good services and products to their customers to attract them to come to NBP.
5.3. Ratio Analysis
National Bank of Pakistan Ten Years Performance at glance 1
NBP is one of the leading bank in Pakistan. The fact that it is the best bank of Pakistan is obvious from the performance shows in the
table below.
Years2009 2008 2007 2006 2005 2004 2003 2002 2001 2001
Items
Total
assets
47186
0
43280
3
41508
9
37163
6
35040
6
41768
0
40089
0
36923
6320180
27177
9
Deposits
39556
8
36286
6
34961
7
31649
3
29475
4
27339
1
25486
3
23503
2
208283 17047
6
Advances 16099 14054 17031 14031 12255 10935 10559 85854 81528 62548
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0 7 9 8 9 6 8
Investme
nt
16619
6
14352
5 71759 72609 91486
10235
6
10948
5
10820
6
95649 85094
S,s holder
equity 18134 14279 11959 11378 10358 9987 9203
7046 7842 7233
pre tax
profit 9009 6045 3016 1023 520 2135 996
(1260) 3081 2799
After tax
profit 4198 2253 1149 461 31 0 0
-------- ------ -------
Earning
per share 10.23 5.49 3.08 1.24 0.21 0 0
------- ----- -------
Return on
assets 2% 1.40% 0.80% 0.30% 0.20% 0 0.00%
--------
--
------ -----
No of
Branches 1213 1204 1245 1428 1431 1434 1468
1555 1537 1463
No of
Employee
s 13272 12195 15163 15351 15541 15785 18096
23730 21549 20667
RATIOS ANALYSIS
Financial analysis is the process of identifying the financial strengths and weakness of the
firm by properly establishing relation ship between the items of balance sheet and profit
and loss account, in order to make rational decision in keeping with the objective of the
organization, for that purpose the management use analytical tools. To evaluate the
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financial condition and performance of the business entity, the financial analyst needs to
perform "checkups" on various aspects of the business financial health.
A tools frequently used during these checkups is a financial ratio analysis, which relates
two piece of financial data by dividing one quantity by the other we calculate ratios
because in this way we get a comparison that may prove more useful than the raw
number by themselves. The business itself and outside providers of capital (creditors and
investors) all undertake financial statement analysis. The type of analysis varies
according to the specific interest party involved. The nature of analysis is depending at
the purpose of analyst.
Parties interested in ratio analysis
Trade creditors
Trade creditors are interested in firm's ability to meet their claims over a very short
period of time. Their analysis will, there fore confine to the evaluation of the firm's
liquidity positions.
Suppliers of long-term debt
Suppliers of long-term debt on the other hand are concerned with firm's long-term
solvency and survival. They analysis the firms profitability over time, its ability to
generate cash to be able to pay interest and repay interest and repay principal and the
relationship between various source of funds. (Capital structure relationship).
Long-term creditors do analyses the historical financial statements but they place more
emphasis on the firm's projected financial statement to make analysis about its future
solvency and profitability.
Investors
Investors who have invested their money in the firms share are most concerned about the
firm steady growth in earning. As such, they concentrate on the analysis of the firm's
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present and future profitability. They are also interested in the firms financial structure of
the extent it influence the firms earning ability and risk.
Management.
An organization would be interested in every aspect of the financial analysis. It is their
overall responsibility to see that the resources of the firm are used most effectively and
efficiently and that the firm's financial condition is sound.
So thus management employee financial analysis for the purpose of internal control and
to better provide what capital supplier seeks in financial condition and performance from
the business and from an internal control standpoint, management needs to take financial
analysis in order to plan and control effectively.
Ratios analysis
Ratio is the comparison between two figures of balance sheet and income statement.
Cash Ratio:
“This ration is obtained by dividing cash by current liabilities / liabilities”.
This ratio shows that the cash is enough for payment of current liabilities or not. It is
calculated as cash Ratio=Cash/current liabilities
Year 2003 2004 2005 2006 2007 2008 2009
Cash Ratio 0.118 0.169 0.19 0.21 0.22 0.15 0.134
It means that how much cash is available for payment its current liabilities. This ratio of
NBP shows a downward trend. Because of high advances cash is less to cover its current
liabilities.
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Gross Profit Margin Ratio:
“This ratio shows the profit margin in sales/ revenue”.
This is calculated as.
Gross profit/ interest earned
Year 2003 2004 2005 2006 2007 2008 2009
Gross profit margin% 24.8 27.7 28.9 29.59 39.67 46.6 51.9
G. Profit margin relates profit of the organization to its sales (interest earned in case of
Bank).
From calculation it is very much clear that the gross profit margin ration have upward
trend which shows that how much they using their deposits to earn interest. This shows
the profit of the firm relative to its revenue. It is a measure of the efficiency of the firm’s
operations too. As it is clear that the ratio gong high this is the indication of good
performance.
Net Profit Margin:
This ratio measures the firm’s profitability of sales/ interest earned after taking account of
all expenses and income taxes.
This ratio can be calculated as:
Net profit margin ration = Net Profit after taxes / interest earned
Year 2003 2004 2005 2006 2007 2008 2009
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Net profit
Margin % 0.2 1.6 1.7 1.55 3.67 3.18 21.6
Explanation: from the calculation and graph it is very much clear that the performance of
NBP is very good. And the trend is upward. It tells us a firm’s net income per rupee of
revenue. As the trend is upward it shows the high profits in revenue per rupee in case of
NBP. It is because of high advances the NBP has given to the people.
Return on Equity:
Dividing profit after taxation by shareholder’s equity. ROE compares net profit after
taxes to the Shareholder’s Equity.
This ratio is calculated as:
ROE=Profit after taxes/Share holder’s Equity
Table6
Year 2003 2004 2005 2006 2007 2008 2009
Return on
Equity 0.67 5.3 0.2 2.7 6.55 9.4 23.1
Explanation: from the calculation it is clear that the ROE Ratio have an upward trend of
NBP. It is because of high net profit they have earned. It tells us the earning power on the
shareholder’s investments. It is because of high investments by NBP and effective
expense management.
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Return On Assets:
This ratio shows the efficiency of organization that how efficiently utilizes their assets.
This ratio relates profits to assets.
It is calculated as:
Profit after Tax/Total Assets
Year 2003 2004 2005 2006 2007 2008 2009
Return on assets 0.01 0.16 0.008 0.124 0.225 0.52 0.9
From calculation it is clear that this ration of NBP is going high and high. It shows that
NBP using it’s assets very efficiently. That is why they are earning very high profits. This
shows that how efficiently they investing the assets that’s why they are earning high
profits.
Investment deposit Ratio:
This ratio shows the comparison of investments and deposits. This is calculated as.
Investment deposit Ratio=Investment/deposits
Year 2003 2004 2005 2006 2007 2008 2009
Investment Deposit
ratio 42.9 37.7 31.03 22.94 20.54 39.66 42.01
Explanation: From above table and graph it is very much clear that NBP are using their
deposit very efficiently. And earning high profits. The ratio has an upward trend, which
shows the performance of NBP is very good. Now it is the retraction from top
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management to invest 30% of its deposits. This may reduce its profits. But can be fruitful
in long term.
Debit to Equity Ratio:
This ration shows the amount contributed by creditors and shareholders. It shows to what
extent the firm is using borrowed money. It is computed simply dividing the total debt of
the fire by its shareholders equity.
This calculated as.
Total debt/shareholder’s equity
Year 2003 2004 2005 2006 2007 2008 2009
Debt to equity
ratio 32.42 31.4 30.4 20.9 22.7 28.6 24.5
From the table and graph it is clear that this ratio is decreasing which show the high
efficiency of NBP. In 2002 it was high but in 2004 it decreases to 24.5 from 28.6 which
is a good sign. Here the creditors are interested in low ratio. The lower the ratio the high
the level of the fire’s financing that is being provided by the shareholders.
Debt to assets ratio:
This ratio shows that to which extent the organization assets are financed by debit. It is
calculated as.
Total debt/total asset
Year 2003 2004 2005 2006 2007 2008 2009
Debt to asset 0.94 0.944 0.957 0.954 0.92 0.954 0.961
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ratio
This ration is directly related to risk high ratio means high risk and low ratio means low
risk. From calculation it is clear that the ratio is decreasing which show low risk. This
ratio serves the similar purpose to the debt to equity ratio. This ratio is high because of
more deposits in the bank, and deposits are the liability of customer on bank.
Advances deposit Ratio:
This ratio show that how much efficiently the bank advances the deposits of their
customer to borrower.
It is calculated as.
Advances deposit ratio = Advances/ deposit
Year 2003 2004 2005 2006 2007 2008 2009
Advances
deposits ratio 0.414 0.399 0.416 0.443 0.487 0.387 0.406
From above table and graph it is clear that the ratio is going high. Which means the
efficiency on NBP is good and they use their deposits efficiently in advancing to
borrowers. Here high ratio is required. The next side of the picture is that the people will
think that is risky to deposit the money in the bank.
Assets Turnover Ratio:
The relationship of net sales /revenue to total assets is known as the total asset turnover
ratio. It is calculated as.
Total revenue / total assets
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Year 2003 2004 2005 2006 2007 2008 2009
Assets turnover ratio 0.099 0.097 0.093 0.079 0.075 0.079 1.07
Explanation: This ratio shows us the relative efficiency with which a firm utilizes its total
assets to generate revenue. We can see that the ratio is going high and which is a good
sign and shows that NBP is utilizing its assets efficiently.
Price to earning Ratio:
This ratio show the relation ship b/w face price per share and earning per share. This ratio
is calculated as:
Price to earning ratio= face price of share/earning per share
Year 2003 2004 2005 2006 2007 2008 2009
Price to
earning Ratio 2.4 2.7 47.62 3.17 3.25 1.6 0.97
As from the above calculations it is clear that the ratio decreased tremendously in 2004, it
is because of the reason that earning per share increased resulting in decreasing price to
earning ratio.
From calculation it is clear that it have a downward slope. It is b/c of increase in earning
per share.
Dividend yield:
Anticipated annual dividend divided by the market price of the stock.
It is calculated as.
Dividend yield =Total dividend/ market price
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Year 2003 2004 2005 2006 2007 2008 2009
Dividend
Yield 0.2 0.1 2.3 3.32 1.63 2.45 0.23
Deposit growth Ratio:
This ratio shows the growth rate of deposits.
This is calculated as
Current year deposits- previous year deposits /previous year deposit
Year 2003 2004 2005 2006 2007 2008 2009
Deposit
growth ratio 0.08 0.07 0.08 0.07 0.1 0.037 0.09
Advances Growth Ratio:
This ratio shows the growth rate of advances. This is calculated as
Current year advances- previous year advances / previous year advances.
Year 2003 2004 2005 2006 2007 2008 2009
Advances
Growth
ratio 0.23 0.04 0.12 0.14 0.21 -0.17 0.15
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Summary
By summarizing the above two analysis we can say that the NBP’ main strength is better
performance as compared to its competitors and main weak points are political issues in
its managements and the lack of international recognition, make investment at globally
and consumer financing are the major opportunities and the increasing competition and
unstable economy of Pakistan is the major threat for the NBP.
CHAPTER SIX: Recommendations
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INTRODUCTION
NBP is an effectively operating and profit making organization and carrying out its
activities under a specified system of procedure. The main regulatory body is State Bank
of Pakistan, which provides policy guidelines and ensures that the money market operates
on sound professional basis. While the head office specifies the whole procedure of
function and operations. This procedure has been modernized with the passage of time
with a view to streamline the approach and underlying procedure for effective
overhauling of its own capabilities so as to bring them at par with international practices.
Here I am giving some suggestions, which in my view can add some input for efficiency
and better performance of NBP as an organization in general and City branch in
particular.
The recommendations are as follows:
Professional training
NBP staff lacks professionalism. They lack the necessary training to do the job efficiently
and properly. Although staff colleges in all major cities but they are not performing well.
For this purpose these staff colleges should be reorganized and their syllabus should be
made in such a way to help the employee understand the ever-changing global economic
scenario.
Banking council of Pakistan should also initiate some programs to equip the staff with
much needed professional training.
Delegation of authority
Employees of the bank should be given a task and authority and they should be asked for
their responsibility.
Performance Appraisal
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The manager should strictly monitor the performance of every staff member. All of them
should be awarded according to their performance and result in the shape of bonuses to
motivated and incite them to work more efficiently.
To Over Come Problem of Space and Furniture
In the critical analysis this, problem is discussed. To overcome this problem it is
suggested that a special section should be made inside the branch. Which should only
handle the treasury function, salaries and pensions of federal personnel or the bank
should do these functions in the evening time. Also management should purchase more
furniture and arrange them in such a way which provides maximum space and convenient
especially in deposit department and there should also be convenient sitting place for
customers.
Transfer
Transfer is not properly carried out. Some of the employees are continually serving at the
same post. They are simply rotated at the same branch. Therefore it is recommended that
evenly rotation of every employee should take place after every three years in different
braches of the bank.
Changes in Policies
There should not be any abrupt policies change by the upper management, as this practice
hurts the customer confidences in the bank. Government should make long-term policies
Need of Qualified Staff
Required, qualified staff should be provided to branch in order to improve the functioning
of the branch. Especially a telephone operator should be appointed.
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Utility Bill Charges
Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard job
despite this working resulting in a loss to then Rs 3 to5 per transaction. These charges
should be increased to RS 10 per bill to enable the branch to cover their handling costs
and make some profit.
7Link with the Head Quarter
100 major branches of NBP should established a direct link with the, head quarter
In Karachi, through Internet or Intranet. This will make the functions and decision
making of the management easier and convenient.
Credit Card
National bank of Pakistan should start its operation in credit card. These cards are very
helpful for the ordinary customer in general and the business people in particular. To
make it mores secure and to eliminate the misuse of it, the management is required to
keep proper security against the card.
Installing Validator and ATM
Validator machine is used to count the currency notes and its installation will help to
eliminate to counting errors and will save time.
This branch is situated in the City, which is supported to be the hub of business activates.
In this area an auto teller machine (ATM) is the need of the hour businessmen can easily
check their balance in the bank and also with draw their money conveniently.
Interest on Overdraft:
Overdraft is a short-term credit facility provided by the bank to its trustworthy customers
free of interest. Only bank commission is charge small amount of mark-up on the
overdraft, which will help the bank to improve its revenue position.
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Clean Loans
Clean loan or clean overdraft is the credit facility extended to the customers to the
customers without any security. These types of small term loans should not be extended
to anybody, because sometime these loans are provided to blue-eyed people of the
management and they become a part of bad debts.
Cash Financing
In this mode of financing the amount of credit not utilized by the borrower is remained
tax-free. It is recommended that a small amount of interest should be charge on this
amount as well because the bank gas kept-aside the amount for that borrower and can not
advance it anywhere.
Decreasing Administrative Expenses
Bank should their administrative expenses. This was Rs 8 billion in the year 2000. That
can be done by lying off the surplus pool of employee with golden handshakes scheme.
The branches that are not much used could also be closed. Employee can also be how to
control the bank expenses. That will give positive results in the future.
Needs to be Flexible in credit Policy
As mentioned earlier, NBP is very conservative in advances and loans policy. It reduces
the investment opportunities. Also loans should be given to the small businessmen and
the agriculture sector at the low markup rate. It should adopt flexible credit policy while
giving credit to the agriculture sector.
Technological Advancement
I would like to suggest that at least all the main branches of NBP should be fully
computerized in order to expedite the dealing process among bankers and their
customers. Every department should be provided a computer with adequate training
(especially Advances, Deposits and Foreign Exchange departments).Daily records should
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be entered directly into these computers, (instead entering the overall daily transactions
after the banking hours). It will not only reduce transaction time, will increase accuracy
but will also be efficient as well.
Not only it will be economical but will also reduce the extra burden of work of the bank.
It will also help in reducing the use of excessive paper work.
Staff Relationship
Good relationship among staff member leads to the peak performances in any
organization. I observed that the staff relationship was normal other wise but some time I
noticed that there existed a little conformity among the staff members. Another syndrome
from which the staff suffered was that all of them considered themselves more important
than others. Some of the officers used to say that if I am absent for a day the bank would
stop working. So this sort of attitude is not good because it mars bank image and juniors’
willingness learn and work hard and in the end will hurt the whole team.
Improper Distribution of Work
Proper distribution work leads to success in every organization. Proper distribution of
work prevents the employee from over and under work situation. So for a smooth running
of an organization proper distribution of work is the hint to be followed.
During my internship I observed that there was no proper distribution of work in the
bank. I saw that some of the employee worked like ants other sat idle starting here and
there. So this created a lot of over work situation for while relaxation for other.
Favoritism and nepotism
In the City branch during my internship I saw that when some of the employees are
transfer to other places, due to their relation with influential people and with top
management they can cancel their transfer in few weeks, when they are unsatisfied at that
place.
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So I suggest that in the organization there should be no favoritism, nepotism and politics
and their transfer and promotion should be made on merit and according to the rules and
regulations of the bank and provided favorable environment to the employee to show
their performances.
Inter Departmental Transfer
I watched during my internship that, there is number of employee who have worked on
one seat for many a year. It can have negative effects motivation of employee who is hard
working and intelligent. Take the example of advances section. In advance section if the
employee is transfer after sixth month or seven month, how can he be able to show his
performances and how can he be able to know the bank customer in a short period of
time.
Foreign currency Account
For the internship the place I have selected was City branch, which is my forefather land
and I know that from area many people have traveled to other country for different kind
of jobs, and I have heard personal complaint about the unavailability of foreign currency
account in banks. So I thick it is wonderful opportunity for the bank to open foreign
currency account.
Marketing Policy
The branch should adopt various marketing strategy and promotion strategy to promote
the bank and its product.
The most important in my opinion is personal marketing; it is the most effective of all
when you think in term of branch level. But on the whole organization level, they should
arrange the seminar with in the bank and outside the bank. They should introduce various
prizing schemes just like Allied Bank. Karamad Scheme, Bank Al-Falah (monthly
income earning scheme) and various others.
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They should do more advertising through newspaper and media and through channel of
personal contacts.
Complaints of Customer
There should be an information desk to provide the information and to receive the
complaints of the customer in the bank.
There is no complaint box available in the branch and not any person appointed to hear
the complaints.
Every person cannot go to the manager for the complaint because most of the people are
hesitant. So I suggest management to install a compliant box in the branch, and recruit a
special person for that guidance of the customer when they are unable to manage some
difficulties in banking matters.
Analysis of the Business:
Proper analysis of the business reports should be conducted before extending any type of
loan. For this purpose professional training of the stuff member is required.
Organizational Commitment
It is suggested that employees working on daily wages basis should be given some
benefits, which the other employees are getting. Their salaries must increase according to
efficiency, performance and service.
Managerial Leadership
In the analysis, we have discussed the difficulties of the assistant in taking any initiative;
therefore it is recommended that the assistants should he given special training to make
them ready for the leadership.
Credit Monitoring
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The credit department of the bank should carries out vigilant credit monitoring. They
should ensure the proper payment of installments and the mark-up by the borrower.
The staff members who have done all the paper work of the loan extension should
perform the monitoring, as he/she will be having more information about the borrower.
Extended Banking Hours
The banking hours may be extended up to six, as being practiced by HBL opposite to it.
Some of the business community due to law and order situation are now reluctant to keep
the fund in their premises and would want to depart with it. Therefore, City Branch may
extend the night banking to cater to demand of this business community. The branch could
also be opened to cater the requirements of this business community
Limited staff:
Housing and House Hold Goods loans
Bank should initiate these loans because most of bank’s customers are middle class and
they cannot afford to buy house or household goods at once by their own
Avoiding Bad Debts
Great care should be taking while extending the loan. Loans should be awarded against
reasonable securities, where market value should be equal to the loan granted.
Policies should be crafted in a way to ensure that no loan is extended on political
pressure. SBP regulation for loan approval should be strictly followed. According to
which the current ration of borrower’s business must be 1:1 and the debt to equity ratio
should be 60:40, means the liquidity position of business should be healthy.
Car Financing Scheme
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Another financing scheme with the name of “MARE GARE CAR FINANCING
SCHEME” should be initiated This finance scheme will help the general public to buy
the car of their choice in easy quarterly installments The bank monitors will do strict
monitoring and the car will be hypothecated with the bank against the car loan.
Conclusion
The National Bank of Pakistan plays a key role in the strategic national development. The
bank has historically been the financial arm of the government and has enjoyed the
blessings of state support in the form of huge public sector funds and deposits.
In contract to other banks populating the FSI sector, NBP is mandated to uphold public
interest. It is critical too as all other banks and NBFIs in public sector have been closed
down or merged with NBP.
In contract to other banks populating the FSI sector, NBP is mandated to uphold public
interest. It is critical too as all other banks and NBFIs in public sector have been closed
down or merged with NBP.
The current management of National Bank of Pakistan was hired purely for their
international experience, business orientation to turn around a purely public institution
into a sustainable and commercially viable bank serving public interest along the lines of
a large modern commercial bank.
The National Bank of Pakistan has effective budgeting system in place. Annual budget of
the bank is approved by the Board and monthly comparisons of actual results with the
budget are prepared and reviewed by the senior management.
The National Bank of Pakistan has a comprehensive framework of written policies and
procedures on all major areas of operations such as Credit, Treasury Operations, Finance,
Internal audit and Compliance approved by the Board.
The National Bank of Pakistan provides sustainable financing for growth of industries of
critical national importance such as energy, education, healthcare, transport, shipping,
Research & development.
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List of Abbreviations
HO Head Office
RHQ Regional Head Quarter
MCB Muslim Commercial Bank
MBA Masters of Business Administration
DD Demand Draft
MT Mail Transfer
TT Telegraphic Transfer
ATM Automated Teller Machine
LC Letter of Credit
RTC Rupee traveler cheque
TFCs Term Finance Certificates
FCC Foreign current cash
FTD Fixed term deposit
FCC Foreign current cash
TRF Transfer
FTD Fixed term deposit
PMT Payment
PLS A/c Profit & Loss Sharing account
SWOT Strengths, Weaknesses, Opportunities, Threats
NPL None performing Loans
PACRA Pakistan Credit Rating Agency
ROE Return on Equity
CRR Cash Reserve Requirement
SBP State Bank of Pakistan
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NIFT National Institutions Facilitation Technology
NBP National Bank of Pakistan
UBL United bank Limited
ABL Allied bank Limited
SSGC Sui Southern Gas Company
PO Pay Order
NADRA National data base and registration authority
PEST Political, economic, social, technological
References
Israr, Siddiqi H. (1998). Practice and Law of banking in Pakistan. Karachi: Decent Print Enterprises. Page 15-17
Sir, Paged John. The law of Banking. The Law of Banking. McGraw Hill Publication: page 51-58
Nasir, Saeed H.(2001). Money and Banking. Pakistan, Kitab Markaz: Page.105-106
www.nbp.com.pk
Bank Nationalization act 1974.
www.google.com.pk
. http// www.nbp.com.pk .services
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